KEY ISSUES FOR DIGITAL TRANSFORMATION IN THE G20

deductions on investments in seed and early-stage ventures) and back-end tax relief (which relate to capital
gains and losses).
Regulatory impediments to retail and institutional investors have been lifted in many constituencies. For
instance, retail investors are encouraged to enter risk capital markets by increased threshold levels at which
public disclosure and related requirements kick in, or by tax breaks for investment in unquoted companies that
may subsequently list. Recent regulatory approaches recognise that public equity listings for SMEs may require
tailored regulation and infrastructure to facilitate access by SMEs while preserving investor interest. In some
countries, new markets offer growth-oriented entrepreneurs dedicated services, such as the introduction to
experienced investors, or the possibility to retain a higher level ownership than a traditional IPO. Furthermore,
policies to develop private and public equity markets for SMEs increasingly target training, mentoring,
coaching and networking for investors (G20/OECD, 2016). In addition, governments increasingly recognise the
importance of addressing the fragmentation of financial markets, by removing barriers to cross-border
investment, to help SMEs tap into more diverse sources of capital and lower their costs of funding, as well as
to broaden opportunities for investors and savers (G20/OECD, 2016).
Governments have also increased direct interventions to sustain the supply-side of the venture capital market
by creating new government VC funds, and introducing fund-of-funds and public/private co-investment funds.
The G20/OECD High-level Principles on SME Finance recognise the importance of public programmes to
catalyse and leverage the provision of private resources and competencies in risk capital markets, and call for
adopting principles of risk-sharing and mitigating mechanisms that ensure proper functioning of public
measures, including the allocation of resources to their most efficient use, while avoiding excessive risk-taking
against the public interest and potential crowding-out effects.
While the demand side of equity markets has received overall less policy attention in recent years, it is now
increasingly recognised that to sustain the development of alternative financing instruments, demand- and
supply-side impediments need to be addressed in tandem. On the demand side, many entrepreneurs and
business owners lack financial knowledge, strategic vision, resources and sometimes even the willingness or
awareness to successfully attract sources of finance other than traditional debt instruments. The G20 Highlevel
Principles for Digital Financial Inclusion call for supporting and evaluating programs that enhance digital
and financial literacy in light of the unique characteristics, advantages, and risks of digital financial services and
channels. In this regard, investment readiness programmes can help entrepreneurs to better understand the
advantages and risks of diverse sources of finance, the needs and expectations of potential investors, as well
as to improve the quality and presentation of their business plans.
Further investment in digital infrastructures, especially high-speed networks and data itself, is essential to
support a vibrant, innovative and inclusive digital economy. Innovative enterprises that are looking to
implement new business models in their production activities, distribution, etc. are also critical in this regard.
At the same time, access to finance is a key challenge. There are a number of areas in which governments
could play a role to help address some of these concerns including ensuring that that the right frameworks are
in place to incentivise investment in infrastructure, particularly in unserved areas, and reducing barriers where
possible.
There are a number of areas in which governments can take action to encourage further investments in
telecommunication infrastructures, especially high-speed networks. In particular, governments have a role to
play in unserved and underserved areas. Such investment can take the form of PPPs, where public funds are
invested in co-operation with private actors, ranging from utility companies and network operators to local