Presented at the July 2012 Meeting of the OECD-MENA Initiative's Working Group on SME Policy, Entrepreneurship and Human Capital Development http://www.oecd.org/mena/investment

1. SME and Entrepreneurship Access to Finance:
an OECD Scoreboard
MENA-OECD Investment Programme
Meeting of the Working Group on SME Policy,
Entrepreneurship and Human Capital Development
Rome, 17 July 2012
Sergio Arzeni
Director
OECD Centre for SMEs, Entrepreneurship & Local Development (CFE)

2. SME Financing Gap in MENA Countries
Structural deficiencies
o Credit maninly directed to public sector and large firms
Firms with loan/line of credit from financial
institution (%)
Source: IFC
o SMEs and micro firms are under-collateralised
o Cash flow shortages from late payments
o Little venture capital for start-ups

3. Policies to improve SME access to finance
The experience across OECD and non-OECD countries
Easing cash flow
•
•
•
•
•
•
•
Direct lending
Loan guarantees
Deferring or exempting tax payments temporarily
Capping interest rates
Credit mediation
Reducing payment delays by the public administration
Collateral reforms (movable assets)
Favouring long term equity investment
• Guarantees and tax incentives for equity capital
• Co-financing venture capital

4. SME Financing: the assessment challenge
Policy makers and major stakeholders (e.g. financial
institutions) lack the hard data necessary to:
• Monitor SME financing trends and needs
• Evaluate SME financing policies and programmes
Knowledge gap on:
- Supply of finance by (various) financial institutions
- Demand and use of financing by SMEs
- capital structure and destination of funding
- Effectiveness of government policies directly and
indirectly affecting SME access to finance

5. SME and Entrepreneurship Financing
an OECD Scoreboard
Objectives of the Annual Scoreboard:
1. Provide a tool for policy makers to monitor access to finance
in a timely manner and judge policy effectiveness
2. Highlight important economic and policy developments
3. Identify and exchange on a regular basis good policy and
practices
4. Guide governments to assemble meaningful indicators
and favour harmonization of definitions and data
collection methods

6. Building a monitoring framework
2010: Pilot Scoreboard (11 countries)
 methodological input to the G20 SME Finance Sub Group
2012: First Edition (18 countries)
• 2007-2010
– pre crisis (benchmark)
– crisis
– recovery
• Thematic focus: Basel III and SME lending
2013: Second Edition (28 countries)
• Learning process: Refinement of indicators and policy review
• Thematic focus: role of public financial institutions
International reference on SME financing

7. The Criteria for Selection of Indicators
1. Availability: they must be based on existing data or
2. Feasibility: data that could be made available easily
3. Usefulness: they must assist policy makers in
assessing the situation
4. Timeliness: they must be produced annually or
quarterly to serve as a tool for monitoring
5. Comparability: they must cover the same target
population of SMEs for the same time period; target
population are firms that are non-financial and
independent and have at least 1 employee

8. The ‘Core’ Indicators
DEBT
SME loans / business loans
SME non-performing loans/SME loans
SME short term loans/SME loans
SME gov. guaranteed loans/SME
loans
SME interest rates
Interest rate spreads (small vs. large
firms)
SME gov. direct loans/SME loans
SME collateral
SME loans authorized/SME loans
requested
EQUITY
Venture and growth capital
OTHER
SME payment delays
SME bankruptcies

9. Business loans to SMEs and large firms
Korea
United Kingdom
Quarterly, in KRW millions and as a % of total business loans
Business loans, large firms
Business loans, SMEs
Year-on-year percentage change, as a percentage
% business loans, SMEs
600,000,000
Corporations
90%
All SMEs (Up to GBP 25m turnover)
Small SMEs (Less than GBP 1m turnover)
30
88%
500,000,000
86%
400,000,000
84%
300,000,000
82%
200,000,000
25
20
15
10
80%
78%
100,000,000
5
0
Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2007
2008
2009
76% -5 2008 2008 2008 2008 2009 2009 2009 2009 2010 2010 2010 2010 2011
-10
2010
-15
Source: OECD Scoreboard, 2011
Source: Bank of England Trends in Lending July 2011

10. l
SME Interest rate and spreads, 2007-10
Quarterly, average SME interest rate and spreads between SMEs and large firm rates
Denmark
Interest rate spread
Italy
Interest rate, SMEs
Interest rate spreads (SME vs large firm)
8
SME average interest rate
7%
7
6%
6
5%
5
4%
4
3%
3
2%
2
1%
1.04 0.96 1.07
0.64
0.86 0.96 1.05
1.36
0.96
1.31 1.18 1.39
1.63
1.36 1.43 1.46
1
0%
0
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2007
2008
Source: OECD Scoreboard, 2011
2009
2010
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2007
2008
2009
2010
Source: OECD Scoreboard, 2011
10

11. Collateral requirements
Canada
% of Small businesses required and not required to provide collateral
Thailand
Value of collateral provided by SMEs
As a percentage of total SME business loans
Collateral,
Collateral, SMEsSMEs
250%
200%
150%
100%
50%
0%
2007
2008
2009
2010

12. Non-performing loans
United States
Thailand
Annual, as a % of total loan stock
Annual, as a % of total business loan
Non-performing loans, SMEs
Non-performing loans, total
4.5
9%
3.9%
4.0
3.5
7.9%
8%
3.47%
7%
3.0
6.85%
7.6%
7.3%
6%
2.5
Non-performing loans, total
5%
2.0
5.4%
4%
1.89%
3%
1.5
1.0
5.3%
1.22%
2%
0.5
1%
0.0
0%
2007
2008
2009
2010
2007
2008
2009

13. Recommendations to improve
data collection and monitoring
• Require financial institutions
– to use the national definition for an SME, based on
firm size
– to report on a timely basis to their regulatory
authorities SME loans, interest rates, collateral
requirements, as well as those loans that have
government support
• Encourage international, regional and national
authorities as well as business associations to work
together to harmonise quantitative demand-side
surveys
• Promote the harmonisation of Venture Capital
definitions

14. OECD Scoreboard: How to participate
• Nomination of a country expert
• Typically specialised in SME finance statistics
• Access to data from different sources
• Coordination of the expert with the OECD Secretariat
– Identification of appropriate data sources
– Definitions and proxies
– Regular updates

15. THANK YOU
Sergio.Arzeni@oecd.org
CENTRE FOR ENTREPRENEURSHIP, SMEs & LOCAL
DEVELOPMENT(CFE)
www.oecd.org/cfe