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Policy instruments to improve MSMEs access to external financing in developing countries: A survey

Modeste Dayé, Romain Houssa () and Paul Reding ()
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Paul Reding: CRED, University of Namur

No 106, BeFinD Working Papers from University of Namur, Department of Economics

Abstract: This paper presents the salient factors that characterize important aspects of firms’ access to external finance in developing countries. Cross-country data show that micro, small and medium-sized enterprises (MSMEs) face more external financing constraints in Low Income Countries than in their rich counterparts. To explain this fact we distinguish both demand and supply factors underlying external financing constraints. We then argue for a catalytic role that development cooperation can play in alleviating these constraints. We present an illustration based on the policy instruments that have been used by development cooperation. Our particular interest is to document how well the Belgium Development Cooperation support of MSMEs compares to that provided by four other European countries: France, Germany, The Netherlands, and Sweden. We conclude with a discussion on the critical policy issues as regards the effectiveness of these interventions.

Keywords: MSME; external finance; DFI; information asymmetry (search for similar items in EconPapers)
JEL-codes: G23 O16 Y10 (search for similar items in EconPapers)
Pages: 60 pages
Date: 2015-06
New Economics Papers: this item is included in nep-cfn, nep-ent and nep-sbm
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