Latin American Capital Markets

396 HANNESTAKACS AND KINGA KORCSMAROSas a requirement for receiving credit. Appropriate regulations, providing and distributinginformation to all key players and thus transparency, would improve the functioningof the credit market.Business development services (BDS) can significantly contribute to buildingthe competitiveness of SMEs. Train ing and consultancy services in financial management,financing methods, and instruments could improve SME access to capital andfinance. However, the demand for BDS among SMEs is relatively low because SMEsdo not recognize the potential benefits of these services or cannot afford expensivecourses or trainers. The government initiatives in Taiwan are a good example of successfulfinancial BDS for SMEs.The Taiwan government invited a group of internationalexperts to advise SMEs to solidify their financial structure and strengthen their conditionsfor financing.The experts provide objective opinions to financial institutions consideringproviding loans to SMEs.The SME Joint Assistance Center provides guidancein financial management, coordinates among financial institutions in solving fundingproblems, assists SMEs in training their financial managers, and compiles publicationson financial management. So far; more than 20,000 SMEs have received assistance andguidance from the center 4Financing InstrumentsEnterprises require differential levels of funding at various points in their life cycle, suchas debt capital, equity financing, or some combination of the two.The combination offinancing depends on many factors, including the size of the firm, its life cycle stage,and its growth prospects. This section shows that the mechanisms to access capitaldepend on specific factors.The analysis focuses on the following factors:• Destination of funds: equity or debt finance• Source of funds: internal finance (own funds or retained profit) and externalfinance (private and institutional investors or lenders)• Period of financing: short-, medium-, or long-term finance.Table 12-2 shows the different sources of debt and equity financing. For example,in Europe, bank financing dominates the distribution of resources for SMEsthroughout their entire life cycle (table 12-3).Copyright © by the Inter-American Development Bank. All rights reserved.For more information visit our website: www.iadb.org/pub4 See http://www.moeasmea.gov.tw/english/html (October 18,2001).