Enhancing smE financing in acp countries - ACP Business Climate

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Closing the financing gap: options & opportunities
Regulatory environment
• Adapt the regulatory environment for SME lending for
banks;
• Make the creation and registration of companies much
easier;
• Adapt customs duties, principally in terms of their
transparency and procedures.
Financial infrastructure
• Financial information infrastructure. Governments and
public authorities such as central banks have a critical
role to play in developing credit registries. Providing data
to credit registries/bureaus should be made mandatory.
This constitutes one of the elements in reducing credit
risk perception by banks with regard to SMEs;
• Adapt banking regulatory requirements in their
treatment of risk by supervised banks, such as in collateral
requirements and requirements in terms of historic data,
cash-flow analysis, and other difficult-to-fulfil requirements
for SMEs;
• Accounting and auditing standards. A better balance
needs to be achieved between transparency and
regulatory simplicity.
Secured transactions framework
• The value of collateral and other financial guarantees is
considerably reduced by weak and complex enforcement
mechanisms. This augments the credit risk for banks and
considerably discourages SME lending.
Dispute resolution
• A weak, cumbersome, unreliable and sometimes
corrupt judiciary stands in the way of small business
development. This is the case for domestic business
disputes, but is even more the case for cross-border trade
and financial disputes. A likely remedy is the creation of
effective Alternative Dispute Resolution Mechanisms
(ADRs).
Enhancing SME financing in ACP countries
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