Financing SMEs and Entrepreneurs

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2306-5265 (online)
2306-5257 (print)
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Published annually, this report documents the financing difficulties of SMES and entrepreneurs and monitors trends in 31 countries, along with government policy responses to deal with these challenges.

Also available in: French
Financing SMEs and Entrepreneurs 2012

Financing SMEs and Entrepreneurs 2012

An OECD Scoreboard You do not have access to this content

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19 Apr 2012
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9789264166769 (PDF) ; 9789264028029 (print)

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Access to finance represents one of the most significant challenges for entrepreneurs and for the creation, survival and growth of small businesses. As governments address this challenge, they are running up against a major and longstanding obstacle to policy making: insufficient evidence and data. Better data is needed to understand the financing needs of SMEs and entrepreneurs and to provide the basis for  informed institutional and public policy decisions.

This first edition of "Financing SMEs and Entrepreneurs:  An OECD Scoreboard" represents a major step in addressing this obstacle by establishing a comprehensive international framework for monitoring SMEs’ and entrepreneurs’ access to finance over time.  Comprising 18 countries, including  Canada, Chile, Denmark, Finland, France, Hungary, Italy, Korea, the Netherlands, New Zealand, Portugal, Slovak Republic, Slovenia, Sweden, Switzerland, Thailand, the United Kingdom and the United States, the Scoreboard presents data for a number of debt, equity and financing framework condition indicators. Taken together, they provide governments and other stakeholders with a tool to understand SMEs’ financing needs, to support the design and evaluation of policy measures and to monitor the implications of financial reforms on SMEs’ access to finance.

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  • Foreword

    Small and medium-sized enterprises (SMEs) are important engines of growth, jobs and social cohesion. However, the creation, survival and growth of SMEs is often hampered by access to finance, a challenge that is at the core of this Scoreboard on Financing SMEs and Entrepreneurs.

  • Acronyms and abbreviations
  • Financing SMEs and Entrepreneurs: Understanding and Developing an OECD Scoreboard

    This chapter provides the users of the Scoreboard on SME and entrepreneurship finance with tools to interpret the data. It introduces the methodology and presents the core indicators used in the country profiles. The chapter explains the criteria for the selection of indicators and discusses the limitations to cross-country comparability. It highlights areas for advancement and concludes with recommendations to improve SME finance data so as to enable better cross-country comparisons in the future.

  • Emerging Trends in SME and Entrepreneurship Finance

    This chapter analyses trends in SME and entrepreneurship finance for participating countries, based on data collected in the Scoreboard on financing SMEs and entrepreneurs and information from demand-side surveys. An overview of the global business environment and economic prospects sets the framework for the analysis of trends in lending to SMEs and equity financing over the period 2007 to 2010. The pre-crisis (2007) year serves as a benchmark to assess changes in SMEs’ access to finance during the crisis (2008-09) and the recovery (2010). The chapter concludes with an overview of government policy responses to improve SMEs’ and entrepreneurs’ access to finance during the crisis.

  • Basel III and SME Lending: Thematic Focus

    This chapter describes the Basel III reforms to the global financial system and discusses the possible impacts on lending to SMEs and entrepreneurs. Particular attention is given to the impact that the risk weighting system for assets could have on lending to SMEs. The discussion mainly draws from early evaluations and forecasts developed by countries and international institutions. The perspectives of experts from countries participating in the OECD Scoreboard on SME and entrepreneurship finance are also presented.

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  • Expand / Collapse Hide / Show all Abstracts Country Profiles of SME Financing 2007-10

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    • Canada

      The Canadian statistics are based on SMEs when possible, but in many instances, due to data limitations, the country profile reports on only small businesses with 1-99 employees which represent 98.0% of businesses. As medium-sized enterprises, those with 100-499 employees, only represent 1.7% of Canadian businesses, their exclusion does not have a significant impact on the data or results. In 2010, the Canadian small businesses employed 48.3% of the private sector. Among those employees, 76.3% are employed in the services sector and 23.7% in the goods sector.

    • Chile

      In Chile, 99% of all enterprises are SMEs. They employ 57% of the business sector labour force, and 77% of SMEs are microenterprises, 19% are small and 3% are medium-sized.The data does not include the fishing industry and the education and health and social work sectors (ISIC Rev. 3: B M, and N). Although the usual definition of an SME is based on the annual sales of the enterprise, the financial sector uses a definition based on the loan amount, as indicated in . The share of SME loans in total business loans increased during the years 2007-10, from 16.7% to 18.2%. The share of SMEs’ short-term loans in total SME loans was 60% (2010), indicating that loans were mainly being used to resolve cash flow problems in the production cycle or during the course of business. There was a noticeable decrease in the proportion of SMEs’ non-performing loans in total SME loans, from 7.1% (2009) to 6.6% (2010).

    • Denmark

      In 2007, SMEs comprised almost all enterprises in Denmark (99.7%). Monetary financial institutions’ (MFI) lending to SMEs, approximated by loans which amount to less than EUR 1 million, declined by around 30% between 2007 and 2009. SME lending recovered in 2010, registering a 23% increase. However, the total volume of lending was still well below pre-crisis levels. Total business loans declined in both 2009 and 2010. The share of SME loans in total business loans was small (12%) in Denmark, and it declined even further during the recession. As could be expected, the share of SME short-term loans in total SME loans increased over the crisis as SMEs sought financing to remedy liquidity problems. Short-term interest rates declined relative to longer-term interest rates.

    • Finland

      In 2010, 99.4% of all firms in Finland were SMEs (107 934 SMEs), and they employed approximately 60% of the labour force. More than 83% were micro-enterprises with less than 1-9 employees. Total business loans decreased over three years (2007-09) but rebounded in 2010. SME loans declined even faster between 2007 and 2009 and experienced no rebound in 2010. Thus, their share of business loans plummeted from 27.1% (2007) to 14.4% (2010). According to the Bank of Finland, "the MFI data collection scheme was revised as of June 2010, and hence the figures published are not totally comparable with earlier observations. The differences may be due to improved data collection accuracy, revised statistical definitions (e.g. extending the definition of overdrafts and credit card credit to include revolving credits) and the collection of detailed data from all MFIs." (Bank of Finland,, November 2011) This indicates that SMEs faced tougher credit conditions than larger enterprises causing some of these SMEs to seek government assistance. As would be expected during a recession, there was a larger drop-off in SME long-term loans than in short-term loans. Their share in SME loans declined from 78.9% (2007) to 74% (2010).

    • France

      There are roughly 2.5 million SMEs in France. They account for 99.8% of all enterprises and employ 60.5% of the labour force. Both total business loans and SME loans increased over the period 2007-10. This includes both drawn (utilised) and undrawn (not utilised) loans. However, the year-on-year growth rates declined during the recession. The share of SME loans in total business loans stood at 26.2%, the same level as in 2010. The share of SME drawn short-term loans in total SME drawn loans decreased from 21.7% (2007) to 17.7% (2010).

    • Hungary

      Hungary defines SMEs using the standard criteria provided by the European Union. An SME is an enterprise with fewer than 250 employees and which has an annual turnover not exceeding EUR 50 million. The total number of active, employer enterprises in Hungary was 547 440 at the end of 2010, almost all of which were SMEs. This included those which were legal entities as well as non-legal (informal) entities. It also includes self-employed persons, which is in keeping with the EU definition of an SME but departs from the OECD practice of reporting only on employer enterprises.

    • Italy

      SMEs comprise 99.9% of enterprises in Italy and account for 80% of the industrial and service labour force. The sector has a relatively small-scale structure: the share of micro-enterprises is higher than the EU average, while the percentage of small and medium-sized firms is below average (Eurostat, 2011). Data collected from the debt side were mainly available for most of the firms with less than 20 employees, which represent nearly the entire universe.

    • Korea

      SMEs constitute 98.9% of industrial enterprises and employ 71% of the industrial labour force in Korea. SME and total business loans increased over the period under study. SME loan shares were calculated on the basis of total business loans outstanding (i.e. stocks). SME loans increased between 2007 and 2009, but in 2010 they declined by 0.6%. The decline was due to the restructuring of junk bonds and the banks’ conservative management. The SME share of business loans declined from 86.8% (2007) to 81.5% (2010) and most of this decline occurred between 2007 and 2008 when larger firm loans were experiencing faster loan growth. The share of short-term loans in total SME loans increased over the period, as the need for working capital took precedence over investments. SMEs continued to have access to credit despite the alarming rates of increase in non-performing SME loans: 124% between 2007 and 2008 and 44.5% between 2008 and 2009. Data for non-performing loans include domestic and foreign currency loans.

    • The Netherlands

      SMEs comprise 99.6% of enterprises in the Netherlands and employ 68% of the labour force. The Netherlands does not have a definition of SMEs that is applicable to all situations. The national definition conforms to the EU definition of less than 250 employees. However, the Central Bank of the Netherlands uses loan size of less than EUR 1 million to define an SME loan. Furthermore, each bank uses its own reporting system, constituting a challenge to the aggregation of loan data of importance to policy makers.

    • New Zealand

      As of February 2010, 99.6% of New Zealand firms were classified as SMEs, defined as enterprises with 0-99 employees. This proportion has stayed relatively stable since 2001. The loan data includes all enterprises, the majority of which are SMEs.

    • Portugal

      In 2008, SMEs comprised 99.7% of enterprises in Portugal and employed 72.5% of the business sector labour force. Portugal complies with the EU definition for SMEs. The vast majority of enterprises are SMEs, 86% are micro-enterprises, 12% are small and 2% are medium-sized. The share of SME loans in total business loans was nearly 78% during the years 2007-10. The proportion of SME short-term loans in total SME loans ranged between 31%-33%, indicating that SME loans were mainly used to finance investment. In 2010, the global stock of business loans decreased by around EUR 2.3 billion. 83%, or EUR 1.9 billion, was related to SME loans. The share of government guaranteed loans in total SME loans grew significantly from 1% in 2007 to 7% in 2011, demonstrating the sustained public efforts to maintain SME access to finance.

    • Slovak Republic

      The Slovak Republic joined the OECD Scoreboard on financing SMEs and entrepreneurs in 2010. It is in the process of amending its methodology to collect statistics on SME financing. Thus, the data in the current Scoreboard are likely to change as data collection improves. The current framework uses the EU definition for an SME which is an enterprise with less than 250 employees. However, not all banks use this definition. As  shows, SMEs dominate the Slovak economy.

    • Slovenia

      For the purpose of the OECD Scoreboard on SME and entrepreneurship finance, Slovenia defines SMEs as enterprises with less than 250 employees. This definition is also used by the Statistical Office of the Republic of Slovenia, although the official legal definition and the definition used by the Ministry of the Economy are wider and contain additional criteria, including asset value, revenue threshold and requirements from Commission Recommendation 2003/361/ES. The number of SMEs was 165 615 in 2010. Many SMEs were suppliers to large enterprises which were hit hard by the recession. Thus, many SME suppliers also failed.

    • Sweden

      SMEs constitute 99.9% of Swedish enterprises and employ 63.5% of the labour force. The majority of SMEs use the commercial banking sector when seeking external finance. Since no data were available through supply-side surveys, the loans were based on a proxy (enterprise liabilities) obtained from tax record information. Using tax information creates a lag of 18 months in terms of its availability. Both total business loans and SME loans increased between 2007 and 2009. The SME share in business loans was almost constant at 88% between 2007 and 2008 and increased to 92% in 2009. The high share of SME loans in business loans could possibly be explained by the fact that intercompany loans, an important component of the debt of large companies, have been excluded. If one firm raises capital from the market and is acting as the bank within the enterprise group, then these loans might not be included if the bank is classified as a financial company or if it is located abroad.

    • Switzerland

      SMEs, defined as firms with up to 250 employees, constitute 99.6% of Swiss enterprises and employ 66.6% of the labour force. Switzerland resisted the financial crisis better than other OECD countries for a number of reasons. Switzerland is known for its business-friendly policies and flexibility in working hours. It has benefited from an influx of highly educated workers and an early transition from traditional manufacturing to specialised growth areas. These factors contributed to low unemployment rates and a maintenance of domestic demand. This is not to say that Switzerland was entirely immune to the financial crisis, as one of its largest banks got caught up in the subprime crisis and had to be bailed out. Despite this, both SME and total business loans continued to grow during the crisis, albeit at a much slower pace. The share of SME loans in total business loans was over 81% in 2007. It was not possible to compare the 2007 ratio with 2010 because of definitional changes at the national level and reporting errors at a major bank.

    • Thailand

      There were 2.9 million SMEs (firms with less than 200 employees) in Thailand in 2010, constituting 99.6% of all enterprises and providing 78% of employment including agriculture. The economy of Thailand was hit by two major events during the period under study: political instability and the financial crisis originating in the West. The OECD publication Studies on SME and Entrepreneurship: Thailand. Key Issues and Policies (2011) found that less than half of the 2.9 million SMEs can access formal finance. This problem was compounded in Thailand by systemic volatility in financial markets. The Asian financial crisis and the recent global financial crisis have made it difficult for Thai banks to accept risky loans, not least because they were often burdened with extremely high non-performing loan rates. The lesson learned from the Asian crisis in 1997 was that adequate capital alone cannot encourage bank lending. Banks will only lend when they are comfortable with the level of credit risk.

    • United Kingdom

      While the national statistical definition of an SME follows the EU in terms of the number of employees, SME loans are defined by turnover, either up to GBP 1 million or up to GBP 25 million, depending on the source of the data. 94.9% of enterprises have 1-9 employees. Following a period of growth, the stock of lending to SMEs peaked in 2009 and has declined in subsequent years. Lending to large enterprises also peaked in 2008, but declined more sharply than SME lending in 2009. The decline in the stock of lending was affected by both supply-side factors, as well as demand-side factors, with evidence indicating that SMEs were deleveraging and repaying existing bank debt. The SME share in total business lending, for SMEs with less than GBP 1 million turnover, has remained stable but is very small (11.6%) compared to other countries in the OECD Scoreboard on financing SMEs and entrepreneurs, as it does not include all lending to larger SMEs. Other evidenceBank of England (2011), Trends in Lending, April 2011. Available at: suggests total lending to SMEs (with up to GBP 25 million turnover) accounts for around a quarter of the stock of lending to all UK businesses, which is more in line with other countries.

    • United States

      The United States Small Business Administration (USSBA) broadly classifies small businesses as any firm with 500 or fewer employees.The USSBA has two different approaches for defining small firms. The first approach is to define any firm with less than 500 employees as small. This practice was first established by the Small Business Act of 1953. However, the same Act required the USSBA to establish a size standard that should vary to account for differences among industries. Second, the Act called on the USSBA to assist small businesses as a means of encouraging and strengthening their competitiveness in the economy. These two considerations are the basis for the SBA current methodology for establishing small business size standards. For further details see The US Small Business Administration (2009) SBA Size Standard Methodology. These firms account for more than 5 million businesses, or 99% of all firms. They employ slightly over half of the private sector’s employees, pay about 44% of the total private sector payroll, generate about 65% of net new private sector jobs, and create more than half of the nonfarm private Gross Domestic Product.For more details on the importance of small businesses in the US economy see The US Small Business Administration, Frequently Asked Questions.

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  • Methodology

    Financing SMEs and Entrepreneurs: An OECD Scoreboard provides a framework to monitor trends in SMEs’ and entrepreneurs’ access to finance – at the country level and internationally – and a tool to support the formulation and evaluation of policies. This framework is currently built around 13 core indicators, which tackle specific questions related to SMEs’ and entrepreneurs’ access to finance. At the country level, this framework allows indicators to be examined as a set and to draw a more coherent picture of SME access to finance, governments’ responses and the impact of those responses on SME survival.

  • Surveys and Statistical Resources on SME and Entrepreneurship Finance

    Surveys represent an important source of information and data for monitoring the state of financing available and used by SMEs and entrepreneurs, as well as for assessing appropriateness and effectiveness of government policies in this area. A large number of supply-side and demand-side surveys are conducted at the national level by government agencies, national statistical offices, central banks and, in some cases, business associations and private organisations.

  • Example of a Simplified Quantitative Demand-side Survey
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