Targeted SME Financing and Employment Effects: What Do We Know and What Can We Do Differently?

Ruchira Kumar

No 27547256, Jobs Group Papers, Notes, and Guides from The World Bank

Abstract: SME’s form a dominant share of the private sector in developing countries, and account for more than 50 percent of jobs in their respective economies. Besides their positive employment effects, the growth and vibrancy of these firms is also important for broader economic growth, diversification of economic base and as a source of innovation that is exhibited by some of the start-ups. Women-owned SMEs are emerging as one of the fast growing segments within the SME sector. Youth play an important role in the creation of new firms and start up activities. Given this importance of SMEs for creation of more, better and inclusive jobs, there is significant focus on understanding the constraints to growth of this sector and implementing programs to address them in the World Bank Group and the other development institutions. Among the several constraints that they face, access to finance is usually cited as the most important and there are several instruments that can be applied to address this constraint. However, what is the evidence of impact of these programs on the employment effects? This note brings together the learnings and evidence from access to finance interventions on employment and provides some recommendations for development practitioners who seek to maximize this objective from their access to finance interventions.

Keywords: access to finance; small and medium size enterprise; access to finance for women; small and medium enterprise; high growth sme; Cost of Doing Business; access to foreign exchange; access to financial service; innovative access to finance; SME sector; theory of change; employment effect; share of employment; lines of credit; medium sized firms; support sme; job creation rate; quality of job; types of finance; micro finance institution; constraints to growth; effect on employment; long run growth; job destruction rate; reallocation of resource; net job loss; lack of property; number of jobs; access to banking; lack of collateral; factor of production; access to deposit; lack of availability; opportunity for woman; supply of financing; formal financial sector; private equity fund; early stage financing; woman business owner; long term financing; formal bank account; short term employment; venture capital fund; informal sector competition; firm size distribution; availability of finance; share of woman; impact of intervention; financial sector development; working age people; private equity investment; small business administration; corporate governance practice; micro credit scheme; job creation potential; objective of intervention; returns to capital; operation and management; state owned bank; state-owned banks; international development community; employment growth; financing need; SME financing; employment generation; targeted intervention; inclusive jobs; job growth; SME support; empirical evidence; credit gap; financing constraint; firm level; matching grant; SME employment; total employment; firm entry; large enterprise; export orientation; SME lending; working capital; net employment; traditional form; bank finance; SME client; empirical analysis; micro enterprise; External Finance; financing instrument; angel investor; credit constraint; transaction cost; financial product; high probability; high wage; small loan; startup firms; empirical study; financing source; traditional bank; causal chain; employee account; labor productivity; financing option; medium-sized enterprise; literature review; smaller enterprise; indirect employment; young people; financial intermediaries; SME credit; causal link; financial constraint; unemployment rate; financing program; labor intensity; Financing programmes; enterprise survey; exporting firms; employment creation; external investment; industry group; insurance product; wage differential; investee companies; paper issue; bank client; direct investment; investment guarantee; financial viability; study including; investment portfolio; primary reason; job impact; corporate banking; employment impact; market development; firm growth; business license; high entry; finance constraint; impact analysis; political instability; sector work; finance product; SME banking; Equity Finance; selection bias; local economy; transport operator; risk profile; coverage ratio; innovative design; panel data; bank lending; alternative instruments; SME Training; census data; informal firms; banking system; conversion rate; investment fund; smaller one; agricultural enterprise; causal impact; manufacturing sector; employment size; increased opportunity; external source; commercial bank; credit worthiness; information requirement; Project Count; SME statistic; innovative method; regional needs; credit need; reporting system; supply side; leverage ratio; SME loan; lending volume; fragile states; employment share; big data; binding constraint; tax rate; productivity growth; economic diversification; country survey; SME activity; wage premium; capital intensity; small fraction; basic training; average worker; transparent information; entrepreneurial skill; productive use; business environment; financing mechanism; credit costs; formal financing; skill building; positive impact; advanced training; net effect; formal linkage; removing barriers; SME Type; angel investing; debt finance; financial instrument; equity funding; female borrower; financial environment; organizational form; wholesale funding; firm operation; inclusive growth; seed financing; expert panel; large portfolio; credit scoring; traditional financing (search for similar items in EconPapers)
Pages: 43
Date: 2017-06-05
References: Add references at CitEc
Citations: View citations in EconPapers (7)

Downloads: (external link)
http://documents.worldbank.org/curated/en/57709149 ... an-we-do-differently

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wbk:jbsgrp:27547256

Access Statistics for this paper

More papers in Jobs Group Papers, Notes, and Guides from The World Bank 1818 H Street, N.W., Washington, DC 20433. Contact information at EDIRC.
Bibliographic data for series maintained by Selome Assefa Hailemariam ().