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Global coordination needed to deliver SME finance
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A more widespread approach to policy development can help deliver greater levels of support to small and medium-sized enterprises (SMEs), it has been claimed.
The Association of Chartered Certified Accountants (ACCA) has called for greater levels of coordination at a global level, as political leaders attend the G20 summit in Mexico.
In its new Global Agenda on Access to Finance for SMEs, ACCA claimed that more consistent efforts are needed when it comes to small business financing policy.
ACCA claims that SMEs around the world need, but are not receiving, $4 trillion (£2.54 trillion) in financing and official ‘enterprise’ policy forms only a small part of the actual policies relevant to the development of SMEs.
More attention ought to be given to how central government departments impact on SMEs, who may have more influence than the departments or agencies responsible for business and enterprise, the body argued.
"While governments are right to try to address the funding gap for SMEs by offering loan guarantees or providing SME funds from the central budget, they need to consider carefully how sustainable these are," ACCA urged.
"The full potential for defaults on such schemes cannot be deduced from the first years of operation, during which scrutiny tends to be highest. Awareness levels of the schemes also need to be carefully addressed where the demand for such products is often low."
ACCA said that official institutions, such as banks, through which these funds and products are often channelled, need to be encouraged to promote them more actively to their SME clients.
The agenda also says that while banks remain the most significant source of external finance for formal small firms, bank finance is generally only available to those businesses that can offer collateral or a strong record of generating profit.
"This leaves a large number of SMEs which need large investments, but which have mostly intangible assets," ACCA said.
"While it is right that much effort is invested in encouraging banks to reach out to the SME sector and provide more suitable financial products to existing clients, alternatives to bank lending need to generate similar attention and investment in order to build more complete financing markets for SMEs."
Meanwhile, the accountancy body has called for the skills gap among business owners to be addressed.
ACCA noted that very few have formal enterprise or management training, which has an impact on their ability to access finance.
The body has called on the accountancy profession to address this challenge, working with governments and other relevant institutions such as SME bodies to provide financial literacy and management training for owner-managers.
ACCA has urged international organisations to work with national governments to encourage much wider use of learning initiatives.
"Small businesses around the world all face the same challenge - which is how they access finance," said Mark Gold, chairman of ACCA's Global Forum for SMEs.
"With an estimated 420-510 million SMEs worldwide, which between them have an unmet need of nearly $4trillion in funding, the way in which they access the capital they need to start, survive and grow is of paramount importance to the global economy."
He said there are a "range of issues" which policy makers, banks and the accountancy profession need to address and we urge the G20 to consider many of these problems at its meeting.
"There are persistent market failures that stand in the way of a long-lasting change in SME financing across the world and we hope the G20 can begin to address them," Mr Gold said.
Posted by Jon Aspinell
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