Chapter 3. Country snapshots1
This chapter contains a snapshot view of SME and entrepreneurship finance developments, as well as the Scoreboard with core indicators for countries covered in this report. A more comprehensive discussion is provided in the full country profiles published online.
Australia
The Australian Bureau of Statistics defines SMEs as firms employing 0 to 199 employees.
The Australian economy is transitioning, as a decade long mining investment boom has given way to a large and sustained increase in mining exports and broader based growth.
In 2014 and 2015, credit to SMEs rose at relatively high rates, continuing the growth which has occurred since 2007.
The average interest rate charged to SMEs is high compared to most other OECD countries, but has come down by 3 percentage points between 2007 and 2015. The relatively high interest rate charged to SMEs is at least in part, due to Australia’s relatively strong economic performance and hence, relatively high cash rate. The interest rate spread between loans to SMEs and to large firms increased during the financial crisis and has remained higher since. This, at least in part, reflects a reassessment of the riskiness of SME lending.
Venture and growth capital investments increased by 11% between 2014 and 2015, with 2015 levels well above their pre-crisis value.
Leasing and hire purchase volumes rose by 18% in 2015 to peak levels. Factoring and invoice discounting volumes increased significantly during the financial crisis but show no clear trend after this period.
Bankruptcies rose slightly between 2014 and 2015, but are at lower levels than in 2007 and 2008. Non-performing loans as a percentage of all business loans decreased to 1% in 2015.
The Australian Government has a comprehensive SME agenda aimed at promoting growth, employment and opportunities across the economy. Its policies for promoting SMEs focus on reducing red tape, improving the operating environment for business and increasing incentives for investment.
In late 2015, the Australian Government announced a new Financial System Programme which will support SMEs’ access to finance by creating a more resilient, fairer and innovative financial system. It includes commitments to remove legislative impediments to the development of a crowd-sourced equity funding market, and support industry efforts to implement the comprehensive credit reporting regime. As part of the programme, a review is being undertaken into data accessibility and use.
In late 2015 a suite of new tax and business incentive measures was announced under the National Innovation and Science Agenda, including tax concessions for early stage investors in innovative start-ups. In addition, the 2016-17 budget included a commitment to progressively reduce the tax rate of small businesses from 28.5% to 25% over time.
The full country profile is available at https://doi.org/10.1787/fin_sme_ent-2017-11-en
Austria
In 2014, SMEs made up 99.7% of all firms and they employed approximately 68% of the labour force.
New lending has been in continuous decline since 2009, except in 2011. This downward pattern continued in 2015 with new lending to SMEs falling by 1.5%, mainly driven by a contraction in short-term lending. New loans to all enterprises decreased more than lending to SMEs, resulting in a significant increase in the share of SME loans in total business loans.
Austrian banks slightly tightened their credit standards in 18 out of 34 quarters since 2008, and eased them only twice during this period. Despite large firms being affected more strongly than SMEs by this development, demand for SME loans has been declining over 2008-16, and a preference for using internal financing methods has been observed since the end of 2015.
While demand for loans shows no clear trend, the percentage of applicants rejected for a loan increased from 0.4% in 2012 to 5.5% in 2015.
SME interest rates were at a historical low in 2015 and more than halved since 2007 from a level of 5.11% to 2.02%. The share of variable rate loans decreased by 4 percentage points over the past 3 years, but still account for a large portion of loans (92%). This leaves Austrian SMEs exposed to interest rate risks, should rates increase in the future.
Alternative forms of financing (venture capital, mezzanine capital, silent partnerships, business angels or crowdfunding), are on the rise and hold high potential as a finance source for SMEs in the future.
In 2015, bankruptcies declined to their lowest level since 2009, to only 10 per 1 000 firms compared to 18 per 1 000 in 2009.
Austria Wirtschaftsservice GmbH (aws) guarantees for SMEs have implemented a new framework for the 2014-16 period, aiming to not exclude entrepreneurs from subsidies or support for re-structuring or re-launching, shifting from grants to guarantee programmes, and reducing administrative burdens. The use of counter-guarantees for government guarantees has also increased as a result. Additionally, access to crowdfunding was facilitated by an increase in the threshold for capital market prospectuses (Alternative Financing Act).
Austria has set itself as a pioneer in the crowdfunding and alternative investment realm through new regulation. The Austrian government has established two initiatives to facilitate access to capital markets for SMEs. The “aws Equity Finder” platform increases access to alternative forms of financing and provides SMEs with subsidies to help cover the cost of publishing the capital market prospectus. Additionally, the Capital Market Act raised the threshold for capital market prospectuses. A new tax reform became effective on 1 January 2016, with a total volume EUR 5.2 billion, and a reduction of the basic tax rate from 36.5% to 25%.
The full country profile is available at https://doi.org/10.1787/fin_sme_ent-2017-12-en
Belgium
In 2012, a change in the methodology of collecting data was introduced. Reporting since 2012 has become more comprehensive and loans of less than EUR 25 000 are included, in contrast to previous years.
The outstanding stock of SME loans expanded moderately in 2015, following two years of decline.
SME interest rates continued their downward path, and stood at 1.83% in 2015. The interest rate spread between loans charged to large enterprises and to SMEs also further narrowed to 23 basis points in 2015. Survey data similarly illustrate that lending conditions eased between 2013 and the end of 2015.
Leasing volumes increased in 2015 by more than 10%. Factoring continues to be overall more widely used by Belgian SMEs, with growth rates of more than 10% in every year between 2012 and 2015. While factoring volumes accounted for 6.3% of GDP in 2008, this percentage increased to almost 15% in 2015.
Venture capital investments more than halved between 2014 and 2015, but continue to show considerable variation due to the small number of deals conducted every year.
Both payment delays and bankruptcy rates were down in 2015 compared to 2014.
Policy initiatives to ease SMEs’ access to finance are taken at the federal and regional level.
A novelty in the Flemish region is that PMV will market combined financial products to provide a customised “financial engineering” solution for its specific target groups, instead of marketing its different financial products separately. Moreover, the rules of the ARKimedes fund have been adapted. From 2015 onwards, the regulation of ARKimedes has been adapted for ARKimedes-Fonds II from a closed end to an open-end duration: ARKimedes can now re-invest the revenues from ARK investments in ARKIV opportunities and can accredit ARKIVs on an ongoing basis.
In Wallonia, the first two InnovFin and COSME guarantee agreements in Belgium were signed in September 2015, supported under the European Fund for Strategic Investment. Moreover, a new investment fund for Walloon digital start-ups, W.IN.G (Wallonia Innovation and Growth) was recently established.
In 2015, the federal Government launched the so-called “tax shelter,” an income tax credit for people who invest in shares or securities issued by young companies. In addition, tax incentives for investors in equity-type crowdfunding projects were introduced.
The full country profile is available at https://doi.org/10.1787/fin_sme_ent-2017-13-en
Brazil
Micro, small and medium-sized enterprises (MSMEs) form an essential part of the Brazilian economy, accounting for 99% of all legally constituted companies and providing about 65% of formal jobs. There are different definitions of MSMEs in Brazil, which can be classified by turnover, number of employees, or even by exported value.
After years of strong growth, Brazil experienced an economic recession, which began in mid-2014, and is believed to have reached its point of reversal and resumption of growth. Inflation rates have been rising in recent years, reaching 10.7% in 2015 (IPCA). Monetary policy to curtail inflation led to high interest rates of 14.8% for large corporate borrowers and to 30.6% for SMEs. These high and rising rates have created a lending climate with shrinking demand for new SME loans. Interest rates have increased more for micro-enterprises and SMEs than for large businesses. At the end of 2016, however, a reduction of the basic interest rate, as well as the first decline in the interest rates for SMEs since approximately two years was observed.
The stock of SME loans fell in 2015. New lending to SMEs declined in 2014 and 2015. Both observations are in contrast with lending to large businesses, where the outstanding stock of loans, as well as new lending was up in 2014 and 2015. Since 2008, large companies have been receiving a larger share of the business loans granted compared to SMEs. While close to 60% of all SME lending was short-term in 2008, this proportion fell in consequent years, reaching a low of 28.4% in 2015.
Non-performing business loans remained practically constant at 2% of all business loans between 2008 and 2015. Non-performing loans are more common for loans to SMEs and especially to micro-enterprises, which amounted to 7.5% of all loans to micro-enterprises in 2015.
As MSMEs are increasingly considered a policy priority in Brazil and sufficient access to finance a necessary precondition for their success, the government has taken on a more active role in this area, often with the aim to providing financial services to small businesses underserved by formal financial institutions. Notable developments include a micro-credit programme, a quota to use 2% of demand deposits of the National Financial System to finance loans to low-income individuals and micro-entrepreneurs, and a strong increase in the number of service points where financial services are provided.
The regulatory framework for angel investors has been revised in 2016, removing some long-standing barriers for investors in SME markets, most notably by offering more legal protection in the case of company closures. New regulation concerning investment-based crowdfunding is under consideration.
SEMPE, the Special Secretariat for Micro and Small Enterprises, directly linked to the structure of the Presidency of the Republic, is the main body of the Brazilian government responsible for formulating, coordinating, articulating and defining public policy guidelines aimed at strengthening, expanding and formalizing artisans, individual entrepreneurs and micro and small enterprises. In addition, SEMPE leads the articulation of actions aimed at improving aspects of the business environment, aiming to make it more favourable to the flourishing of entrepreneurship, contributing to the expansion and sustainability of micro and small enterprises, with the consequent generation of employment and income.
The full country profile is available at https://doi.org/10.1787/fin_sme_ent-2017-14-en
Canada
In 2015, Canadian small businesses (1-99 employees) constituted 98% of all businesses and employed 8.2 million individuals, which translates into 70.5% of the private sector labour force.
Data from the supply-side survey show that debt outstanding by all businesses increased by 10.5% in 2015, to CAD 710 billion, while debt outstanding to small businesses increased by 1.4%, to CAD 95.3 billion.
Indicators show that small business credit conditions have remained relatively stable since 2011. In 2015, request rates for debt financing slightly decreased to 23%, and the 2015 ratio of funds authorised to funds requested increased to 92.7%, from 83.9% in 2014. The average interest rate charged to small businesses decreased by 0.2 percentage points since 2011, reaching 5.1% in 2015. The business risk premium is back to its 2011 level of 2.3% in 2015. This reflects stable access to financing for small businesses in Canada.
The small business 90-day loan delinquency rate has returned to pre-recession levels. Over 2015, the 90-day loan delinquency rate increased by 0.22 percentage points to 0.68%, back to the level observed at the end of 2010.
Since 2011, the request rate for lease financing has varied between 7% and 11%, and the approval has been above 94% every year.
Equity financing (provided in the form of venture capital) increased by 13.4% in 2015 to reach CAD 2.7 billion, thereby surpassing the level reached in 2007.
In 2015-16, the Government of Canada undertook various measures in support of small and medium-sized enterprises. As announced in the 2016 budget, the government is making available up to CAD 800 million over 5 years, starting in 2017-18, to support innovation networks and clusters. In addition, it will be launching a new initiative in 2016-17 to help high-impact firms scale up and further their global competitiveness.
Furthermore, the Canada Small Business Financing Programme implemented a series of legislative and regulatory amendments to make the programme more appealing to lenders and to better meet the needs of small businesses. These changes included extending programme eligibility to small businesses with gross annual revenues of CAD 10 million or less, from CAD 5 million or less, increasing the maximum loan amount for real property from CAD 500 000 to CAD 1 000 000, and increasing the maximum loan term for real property from 10 years to 15 years.
Since 2015, the Business Development Bank of Canada (BDC) has earmarked CAD 700 million of its existing funds over three years to specifically finance women-owned businesses.
The full country profile is available at https://doi.org/10.1787/fin_sme_ent-2017-15-en
Chile
Economic growth in Chile has slowed down in recent years. GDP grew by 1.9% in 2014 and by 2.1% in 2015, considerably below the levels of 2011-12 of 5.8% and 5.5%, respectively. This situation has severely impacted credit lending to businesses, especially in those sectors that are sensitive to swings in the business cycle. A recovery has been apparent since the second half of 2015, but growth remains below levels observed before 2013.
The SME loan share in total outstanding loans has been increasing since 2007, with micro and small enterprise having better access to commercial loans. Banco Estado has been one of the main advocates for improving the access to finance for SMEs and micro enterprises.
The costs for obtaining credit have been very low by historical standards, but credit demand has fallen in recent years, compared to the 2010-11 period, especially among small enterprises, due to a lack of viable investment opportunities. This explains the coincidence of low costs of credit and generally accommodative credit conditions on the one hand, and slow to even negative credit growth on the other.
Rejection rates were down in 2013, compared to 2011, both for large businesses as for SMEs. No more recent data are available. A negative correlation can be observed between the size of an enterprise and its probability to accesses bank finance. At the same time, 93% of surveyed businesses reported that they did not receive a bank loan because they did not apply.
Non-performing loans were slightly down in 2015 compared to 2014, but remain relatively high, with the overall credit risk indicators of the banking system remaining broadly stable.
The FOGAPE Credit Guarantee Scheme provides guarantee rights to financial intermediaries through an auction process. During 2015, the number of operations and value of guarantees decreased compared to previous years.
CORFO (Corporacion del Fomento de la Produccion) is a governmental institution that also provides guarantees. It conducted 66 038 credit guarantee coverage operations during 2015, worth a total of USD 2 billion in credit.
CORFO currently operates three programmes that support VC funds; the Early-Stage Fund (Fondo de Etapa Temprana, FT), the Development and Growth Fund (Fondo de Desarrollo y Crecimiento, FC) and the Technology Early-Stage Fund (Fondo de Etapas Tempranas Tecnológicas). In 2015, the CORFO Venture Capital Committee approved new credit lines for three managers in the areas of aquiculture, copper and energy. Outstanding venture capital funds invested in 48 firms, resulting in a total amount of investment of USD 50.1 million.
The full country profile is available at https://doi.org/10.1787/fin_sme_ent-2017-16-en
China (People’s Republic of)
In China, micro, small and medium enterprises (SMEs) represent an important part of the economy. Small businesses with 300 or fewer employees account for 98.6% of all firms.
The stock of SME loans increased to RMB 33 301.8 billion in 2014. As loan growth for SMEs usually outpaced total business loan growth in the period, the SME loan share increased from 54.6% to 63.8% over the 2009-14 period. New SME business lending increased by 2.7%, while total new business lending dropped by 10.4% over the 2010-14 period. In 2015, 85.1% of large companies tried to apply for a bank loan, while only 69.9% of SMEs did so.
In 2015, Chinese SMEs enjoyed looser credit conditions. The surveyed-based lending rate for SMEs and large firms decreased from 7.51% and 7.47% in 2014, to 5.23% and 5.26% in 2015, respectively. The great drop in lending costs is the result of both, weak demand and slack supply The interest rate spread between large companies and SMEs has narrowed from 0.68 percentage points in 2013 to 0.04 percentage points in 2014, and reversed to -0.03 percentage points in 2015.
Collateral requirements increased steadily year-on-year in the period of 2009-14, from 50.6% in 2009 to 54.8% in 2014. Stricter collateral requirements were due to an increase in loan rejection rates. In 2015, about 11.7% of SME loan applications were rejected, up from 6.2% in 2013, while only 6.8% of applications from large companies were rejected in 2015.
In 2015, the bankruptcy rate for SMEs was 5.5%, year-on-year down by 24.6%, and payment delays for the B2B (business to business) and B2C (business to customer) sectors decreased to 64.4 days and 27.4 days, respectively, shortened by 7.8 days and 15.2 days with respect to previous the year. In 2014, the ratio of SME non-performing loans to total SME loans stood at 1.97%, increasing slightly by 0.31 percentage points compared to the previous year.
The Chinese government started to reform the commercial registration system, and shortened registration procedures in 2014. These reforms had a big impact on business creation, and pushed the daily business creation from 10 600 in 2014, to 12 000 new companies on average in 2015.
The national SME development fund and national guide fund for venture investment in emerging industries were established in 2015. Unlike most government interventions in this area, a PPP model is used to absorb more investment from the private sector, and to follow market-oriented rules.
Equity financing and other alternative financing instruments are increasingly on the radar of Chinese policy makers. In 2015, SMEs obtained RMB 479.7 billion from the SME Board and the Venture Board in Shenzhen Stock Exchange, and 5 129 small companies were listed in National Equities Exchange and Quotations (NEEQ), receiving a total of RMB 121.6 billion in investment, up by 226.3% in listed numbers, and by 820.7% in financing value. Total venture capital investment was RMB 293.3 billion in 2014, up by 11.2%.
The full country profile is available at https://doi.org/10.1787/fin_sme_ent-2017-17-en
Colombia
In Colombia, micro-enterprises and SMEs (MSMEs) represent an important part of the economy, employing 80.8% of the country’s workforce and contributing to 40% of GDP.
Bank credit is the main financing source for SMEs. In 2015, bank lending accounted on average for 45% of total financing received, followed by suppliers’ finance, leasing, own resources or internal funding and factoring. The stock market, on the other hand, represents only a marginal source of financing for SMEs in Colombia.
During 2014-15, the value of loans to MSMEs experienced an increase of 5%. In turn, total business loans grew at a rate almost three times as high, thus leading to a decrease in the SME loan share to 25.7% in 2015, compared to 28% in 2014, and to around 30% in 2010-13.
Similarly, in the last two years, SME short-term credit grew at a rate of 6.8%, compared with long-term credit which grew at 4.8%. As of 2015, short-term SME loans represented 23.7% of total SME lending, compared to 23.4% in 2014, thus remaining largely on the same level since 2013.
The average interest rate charged on SME loans decreased from 20% in 2007, to 14.7% in 2015. When compared to large firms, however, SMEs faced stricter conditions throughout the reference period, as evidenced by the spread between interest rates charged on SME loans and those charged on large firms’ loans, which stood at around 5.9% in 2015.
The average payment delay in days has increased significantly from 48.8 days in 2007 to 91.4 days in 2015.
Total bankruptcies decreased by 9.6% year-on-year from 2013 to 2014, from 156 to 141, but increased again to 164 in 2015.
Bancoldex is the Colombian business development bank, under the Ministry of Commerce, Industry and Tourism, operating as a second-tier bank. It designs and offers new financial and non-financial instruments to boost competitiveness, productivity, growth and development of MSMEs and large Colombian firms, whether they are exporters or focus on the national market.
In 2015, Bancoldex provided credit disbursements to MSMEs through financial institutions, for a total amount of USD 6 278 429 040, benefiting a total of 112 441 MSMEs.
The National Fund of Guarantees supports MSMEs through guarantees via a financial intermediary, whom the company asks for a loan. The guaranteed portion is on average 50% of the loan. A new regulation on moveable assets, introduced in 2015, opens up new possibilities to obtain credit for smaller businesses, since they can spread their obligations to an extended set of movable property.
The full country profile is available at https://doi.org/10.1787/fin_sme_ent-2017-18-en
Czech Republic
In 2015, there were roughly 1.1 million active enterprises in the Czech Republic, most of them SMEs with less than 250 employees (99.8% of all enterprises), employing almost 1.6 million people (58.9 % of the Czech Republic’s workforce). The bulk of them were micro firms, covering 92.7% of all SMEs.
SME interest rates were down by 106 base points in 2014 vis-a-vis 2015, reaching a new record low and thereby continuing their decline since 2007. Over the 2007-15 period, SME interest rates dropped by 46.3% in total
Venture capital investments peaked in 2008, and then declined dramatically up to and including 2015 by a factor of more than ten. Growth capital declined even faster: whereas more than EUR 191 million of growth capital was invested in 2009, this amount plummeted to EUR 4 million in 2012.
Government support for enterprises and entrepreneurs comprises primarily measures with respect to developmental and operational financing, export support, support of the energy sector, development of key competences, including for instance entrepreneurial skills, financial literacy of entrepreneurs, technical education and research, as well as development and innovation. In December 2012, the Czech government adopted a Small and medium enterprises support strategy 2014-2020 (SME 2014+), which represents the key strategic document for the preparation of the EU cohesion policies over the 2014-20 programming period in the area of enterprises, specifically for the preparation of the Operational Programme Enterprise and Innovations for Competitiveness (OPEIC), and for similarly important national SME support programmes.
SME 2014+ also pays attention to the need for supporting social enterprises and strengthening the education of social entrepreneurs. The SME 2014+ concept is implemented through national programmes supporting enterprises, such as the “Guarantee”, REVIT or Inostart programmes, and via the Operational Programme Enterprise and Innovations for Competitiveness.
SME 2014+ also addresses some of the more general business environment issues that impact SMEs and entrepreneurs, and aims to motivate firms to make use of the funding available for the development of SMEs through EU programmes. These include several tools, such as government loan guarantees, financing schemes for exporting SMEs (Czech Export Bank) and innovative businesses (INOSTART programme), as well as a programme to draw financial resources from the EU structural funds (OPEI), which provides support to SMEs through grants, preferential loans and guarantees.
The Czech-Moravian Guarantee and Development (CMZR) Bank is a specialised state-owned banking entity with a mission to facilitate primarily SME access to financing. In 2015, the organisation signed a “COSME counter-guarantee agreement” – an EU funding programme for SMEs.
The full country profile is available at https://doi.org/10.1787/fin_sme_ent-2017-19-en
Denmark
In 2014, SMEs accounted for 99.6% of all enterprises in Denmark.
SME lending suffered disproportionately in the aftermath of the financial crisis. The share of outstanding SME loans declined from 12% in 2007, already low by international comparison, to 9% in 2009, but recovered again afterwards to 14% in 2015.
New lending to SMEs increased by 39.7% in 2015 on a year by year basis.
A break in the data on SME and business lending in 2013 hampers inter-temporal comparisons between 2012 and 2014.
Survey data illustrates that credit conditions have become more favourable in Denmark since 2014, although the first quarter of 2016 bucked this positive trend. Nonetheless, one in five SMEs described their financial conditions as bad in the first quarter of 2016, down from 40% in the second quarter of 2012. Credit demand among small enterprises was much lower in 2014 than in 2010, however. Overall demand for bank credit by SMEs declined in Q4 2015 and Q1 2016.
Interest rates for SMEs more than halved over the 2008-15 period, from an average of 6.4% in 2008 to 3.1% in 2015. As interest rates for large enterprises declined even more strongly over this period the interest rate spread has widened from an average of 0.4% in 2008 to 1.5% in 2015.
Venture capital investments increased by almost 20 % between 2014 and 2015, but remain well below pre-crisis levels. Growth financing increased three-fold in 2015, reaching the highest level recorded since 2007.
Payment delays declined from 9 days in 2014 to 4 days in 2015, following a continuous downward trend since 2012. Bankruptcies were up by almost 20% in 2015, but remain significantly below levels observer in 2009 and 2010.
Vaekstfonden (the Danish Growth Fund) is a government backed investment fund created in 1992. Vaekstfonden offers guarantees and loans to established SMEs and entrepreneurs, invests equity in young companies with growth potential and has a fund of funds activity focusing on both venture and small and mid-cap funds. In 2013, Vaekstfonden introduced new direct loans for SMEs. In addition, the former scheme for start-up loans and the credit guarantee programme were merged into a single scheme.
Over the 2007-15 period, the amount of growth loan guarantees issued increased from a total loan amount of DKK 174 million in 2007, to DKK 470 million in 2015.
The full country profile is available at https://doi.org/10.1787/fin_sme_ent-2017-20-en
Estonia
In 2014, Estonian SMEs employed 78.5% of the workforce and accounted for 75.8% of value added. 90.6% of all firms were micro-enterprises, i.e. firms with less than 10 employees, employing 32% of the workforce and accounting for 26.6% of value added in 2014
Lending to Estonian SMEs contracted significantly in the aftermath of the financial crisis, with new SME loans almost halving from EUR 3.6 billion in 2007 to EUR 1.9 billion in 2010. Following the rebound of the Estonian economy, new SME lending began to slowly pick up again from 2011 onwards, but remained below pre-crisis levels in 2015, as was the case for outstanding SME loans.
The base rate for the interest rate on SME loans up to EUR 1 million decreased steadily from 4% in 2012, to 3% in 2015. For larger loans, the interest rate declined from 3% to 2.4% over the same period.
Venture and growth capital peaked in 2007 and 2008, and fell sharply in the following years, dropping to a low point in 2011, thus broadly following the trend of other European countries. However, in 2015, venture capital investments decreased further and considerably so, to the lowest level in recent years.
Both, new leasing and the outstanding stock of leasing declined sharply between 2008 and 2009, and only recovered somewhat in 2011. While the total outstanding factoring stock remained quite stable in recent years, factoring flows grew considerably and more than doubled between 2009 and 2015, from EUR 909 million to EUR 2 239 million.
Payment delays, bankruptcies and non-performing loans all increased sharply in the aftermath of the financial crisis, peaking in 2009-10, and starting to level out again in the following years. In 2015, payment delays had dropped below their 2007 pre-crisis level; data on bankruptcies and non-performing loans show a marked and continuous decline from 2010 onwards. Non-performing loans in 2015 amounted to a 2.8% share in total SME loans, almost three times lower than its peak in 2010; SME bankruptcies declined by 12.1 % year-on year and were similarly at about one third of their 2009 peak.
The Estonian government does not provide any direct loans to companies. Instead, different guarantees are offered to SMEs, whose amounts have been rising in recent years. Up to and including June 2016, subordinated loans financed 47 projects for a total amount of EUR 9.4 million and start-up loans added 422 projects financed for a total amount of EUR 11 million.
In 2016, the “EstFund“ was created. EstFund is a fund of funds, set up by the Estonian government and the European Investment Fund with the purpose to increase venture capital investments, mainly into Estonian SMEs. Together, EstFund invests EUR 60 million into venture capital funds to which EUR 40 million shall be added by private investors.
The full country profile is available at https://doi.org/10.1787/fin_sme_ent-2017-21-en
Finland
The vast majority of Finnish businesses are SMEs, employing 62.4% of the labour force in 2014.
New SME lending declined by more than 40% over 2008-14, but appears to have turned the corner in 2015, witnessing a robust expansion of 23%.
The average interest rate charged to SMEs, as well as the difference in interest rates to large firms and SMEs, increased in 2015, suggesting a tightening of financing conditions between 2014 and 2015. Data on collateral requirements, the relative number of discouraged borrowers and survey data shed light on the financing difficulties of small businesses and illustrate that financing conditions in 2015 remained tighter than in 2007-08. Loan rejections, by contrast, were at a low point in 2015.
Venture capital investments showed an erratic pattern between 2007 and 2015, but remained at a relatively high level compared to other European countries, and are generally buoyed by a supportive environment and an entrepreneurial culture.
Finnish business owners are aging and many businesses are in the process of changing ownership as a consequence, or will do so in the next few years. This poses challenges, but also opportunities to the business community and policy makers.
While demand-side data suggests that the demand for bank loans has remained stable in recent years, supply-side evidence points to a drop in the demand over the same period. These conflicting findings could be explained by an increasing discouragement to apply for a bank loan and/or by the increased importance of public financing, potentially crowding out demand for loans from private institutions.
Finnvera is a financing company owned by the government of Finland and the official export credit agency of Finland. Finnvera provides financing for the start-up, growth and internationalisation of enterprises, and guarantees against risks arising from exports. The company acquires its funds mainly from the capital market.
Finnvera’s activities expanded significantly in the aftermath in the financial crisis and after a decline in 2012 and 2013, were on the increase again in 2014 and 2015. Finnvera has increased its risk-taking in recent years (especially in the financing of start-up and growth companies, and companies expanding their international operations), and has raised the upper limit of micro-financing it provides to its beneficiaries, as well as provides financing with a lower amount of collateral than before since 2015. Moreover, Finnvera introduced an instrument (the Growth Loan) for financing major growth and internationalisation investments in SMEs and mid-cap companies.
The full country profile is available at https://doi.org/10.1787/fin_sme_ent-2017-22-en
France
France has approximately 3 million SMEs and they account for 99.8% of all enterprises.
SME lending has remained relatively constant in the 2007-15 period, once amounts are adjusted for inflation, with the share of SME loans compared to total loans remaining around 20% during this time.
Overall, interest rates have decreased, but the interest rate spread indicates that this has occurred more to the advantage of large firms than to SMEs and micro-enterprises.
Only 10% of SMEs perceive access to finance as a problem, with 75% of SMEs obtaining the totality of their required loans, while the euro zone average is at 68%. This is due to the continuous progression of credit loans, easing of credit conditions (interest rates, softer loan conditions), and increasingly successful credit requests rates.
The value of venture and growth capital invested followed a consistently growing pattern since its low in 2002, reaching EUR 3 537 million in 2011, largely driven by a continuous increase in growth capital. This pattern was reversed in 2012, with a sharp decline in both venture and growth capital, overall amounting to a decrease by almost 32% year-on-year. From 2013 onwards, VC investments started recovering again, growing by 42% to EUR 4 610 million in 2015.
Factoring has continued to increase in France since 2009, reaching EUR 29 916 million in 2014, a year-on-year increase of 42.5% compared to the previous year.
Bankruptcies have been on the increase, and delayed payments saw an increase in 2015, partly due to a lagging economy.
In terms of government efforts to keep funding available, the credit mediation scheme has been extended in 2015 in with respect to time (until the end of 2017) as well as to coverage (difficulties encountered by firms in their relation with their factors). It is interesting to note that the Mediation du Credit has signed an agreement with Finance Participative France, the association of crowdfunding platforms in 2015: Firms in mediation will be informed of the possibility to use crowdfunding to address their financing needs, and crowdfunding platforms will inform firms which are not selected on their website, that they can turn to the Médiation du Crédit.
Special financing efforts have been made for companies on the “technological frontier”. As of last year, Bpifrance has increased its production of certain loans, called prêts de développement, focusing on robotics, digital equipment, green loans, training and other intangibles with funds increasing by 18% from 2014-15. In addition, two new government funds have been implemented; one with business angels for companies looking for a first round in institutional funding, as well as a special purpose vehicle to take equity stakes in joint ventures.
The full country profile is available at https://doi.org/10.1787/fin_sme_ent-2017-23-en
Georgia
In 2015, 99.7% of all firms in Georgia were SMEs, accounting for 43.1% of total private employment (and for only 20.8% of private sector value added in 2015), illustrating that the national economy remains more strongly dependent on large enterprises, compared to other OECD countries.
In line with the recent economic expansion, credit to SMEs rose year after year between 2010 and 2015 by more than 158% in total. Throughout that period, total business loans grew at a similar rate, although the proportion of SME loans as a percentage of total business loans remained relatively constant at around 35%, with significant growth to 43% in 2015 year.
The average interest rate charged to SMEs in Georgia is high by OECD standards, but has significantly declined in recent years, from 16.5% in 2010 to 10.7% in 2014. However, in 2015, SME interest rates increased again to 12.7%, in large parts due to political and economic instability in the region.
Although exact data on the availability and use of alternative finance instruments are lacking, available evidence strongly suggests that Georgian SMEs are very dependent on the banking sector for meeting their financing needs and that non-bank instruments play a very marginal role in meeting their financing needs.
Procedures of enterprises’ liquidation and bankruptcies have increased by a factor of more than 40 between 2009 and 2010, following the introduction of new legislation which allowed individual entrepreneurs to initiate the procedures. In 2011, this trend continued with another 52% growth. From 2012 to 2015, the number of official producers decreased again by 62%.
Despite the rapid expansion of credit to SMEs, non-performing SME loans continuously declined between 2010 and 2014, from GEL 144.6 billion to GEL 101 billion. In 2015, NPLs increased again to GEL 161 billion, with 4.4% of all SME loans being non-performing, down from more than 10% in 2010. Non-performing loans for all businesses followed a more erratic pattern, but increased overall over the same period.
Thanks to the reforms implemented by the government in recent years, administrative barriers were significantly reduced and public services streamlined, including a more liberal tax regime, simplification of customs procedures, as well as the licences and permits system, and modernisation of the public administration, including provision of e-government services.
In order to promote SME development and support growth of SMEs’ competitiveness, the Entrepreneurship Development Agency (Enterprise Georgia) as well as the Innovation and Technology Agency (GITA) were established under the Ministry of Economy and Sustainable Development of Georgia (MoESD). Both agencies provide financial support to SMEs, as well as a broader range of services, such as mentoring, trainings and various advisory services. In addition, there are a number of other organisations providing assistance to Georgian SMEs, among which the most active ones are the Georgian Chamber of Commerce and Industry and the Georgian Employers’ Association.
The full country profile is available at https://doi.org/10.1787/fin_sme_ent-2017-24-en
Greece
The Greek economy is dominated by small enterprises. Compared to other European countries, micro-enterprises are more numerous and add more to employment and value added in Greece.
The financial crisis and ensuing sovereign debt crisis hit Greece very hard and the economy is only slowly and hesitantly recovering.
Bank funding dried up for Greek SMEs in the aftermath of the financial crisis. In 2009, new lending shrank by more than a tenfold when compared to data from 2007 and 2008. Although lending to SMEs recovered somewhat in 2010, the data show a clear downward path over the 2011-15 period. In 2015, new loans to SMEs more than halved vis-a-vis 2014.
The downward trend in SME lending coincides with an improvement of the overall economic climate since 2014 and the forecasts of positive GDP growth in 2016 and 2017.
Credit conditions tightened significantly after the financial crisis and remain very restrictive compared to the other EU28 countries as evidenced by survey data.
The SME interest rate has decreased in recent years, but remains much higher compared to other Eurozone countries, illustrating that the accommodative stance of the European Central Bank (ECB) had relatively little impact for Greek SMEs.
The coincidence of lower rejection rates and fewer SMEs applying for bank credit suggests a high and increasing level of discouragement on the part of Greek borrowers. Survey data provides evidence for this assumption.
Venture and growth capital dried up significantly since 2008. In 2015 not a single Greek SME received growth or venture capital investments.
Leasing and hire purchases also suffered from the economic crisis and remain well below pre-crisis levels in 2015. By contrast, factoring and invoice discounting activities have remained relatively stable over 2007-15.
The Greek Government operates a number of loan guarantee programmes. There was a spike in these programmes between 2010 and 2011, but the sovereign debt crisis prevented Greece from continuing such support in 2012 when loan guarantees declined by 50% and they are on a declining path since.
The government also supports equity financing through minority participation in venture capital funds, venture capital companies, and similar vehicles. In addition, the Institution for Growth (IfG) was established in 2014 as a non-bank financial institution aiming to support innovation and growth in Greece by catalysing private sector financing, especially for SMEs.
The full country profile is available at https://doi.org/10.1787/fin_sme_ent-2017-25-en
Hungary
Compared to the EU 28 average, micro-enterprises in Hungary are more numerous and employ a higher share of the work force, but contribute less to value added.
The Hungarian economy is performing relatively well in recent years and the near-term economic outlook is broadly favourable.
Outstanding SME loans declined strongly between 2007 and 2009 and followed an uneven path afterwards. SME loans increased by 2.3% year-on-year in 2015, but levels are still far below their pre-crisis peak. In contrast to SME loans, outstanding loans for the business sector as a whole declined in 2015. SME loans made up 67.2% of all business loans in 2015, the highest percentage for the period observed. Flow data illustrates that new long-term lending, after peaking in 2013, declined strongly in 2014 and 2015.
Between 2012 and 2015, the interest rate charged to Hungarian SMEs went down, as well as the interest rate spread between loans to large enterprises and to SMEs.
Collateral requirements loosened in 2015, and the number of loan applications approved went up sharply. The percentage of loan applications was down in 2015 compared to the 2014 number, but sharply up from 2013.SME non-performing loans fell sharply in 2015, reaching their lowest level since 2010.
Venture capital investments rose in 2014 and 2015, and exceeded pre-crisis levels, the latter in contrast to many other OECD countries.
A new macro-prudential framework has been introduced recently by the National Bank of Hungary (MNB) and came into force in early 2015, creating the basis for a more prudential operation of the banks.
The “Funding for Growth Scheme” (FGS) seeks to raise the number of new investments by providing loans at an affordable interest rate. The MNB announced in November 2015 the extension of FGS (the third, exit stage) with an additional HUF 600 billion available in financing.
In Hungary, a microfinance network provides loans mainly regionally, with micro enterprises as the main target group. Their lending conditions are not as tight as the conditions of commercial banks, and they might take higher risks, but the cost of lending is also higher.
In the context of an agreement with the EBRD, the government has made a commitment not to increase its strategic involvement in the banking sector and sold its 5% stake in the OTP Bank last October. The MKB Bank is planned to be sold in the course of 2016.
The full country profile is available at https://doi.org/10.1787/fin_sme_ent-2017-26-en
Ireland
Irish SMEs contribute to around two-thirds of employment, and this figure increases to 69% when proprietors and family members engaged in the SME are taken into account.
New lending continued to grow with a 10% or EUR 245 million increase in 2015. Loan approval rates similarly continued to increase with 89% of applications either fully or partially approved in 2015.
The interest rate spread between large (2.43%) and small loans (4.77%) continues to increase.
The result of the UK European Union membership referendum may have an impact on credit conditions in Ireland, due to uncertainties surrounding trading conditions.
Venture capital raised by Irish SMEs continued to grow, reaching a total of EUR 522.1 million in 2015, a 30% increase on 2014.
Bankruptcies continued to decline, with a total decline of 42% since their peak in 2011, and a 19% decline on 2014 in comparison to 2015 figures.
Significant progress has also been made in resolving SME NPLs in recent years, and NPL trends continue to move in a positive downward trajectory.
The SME State Bodies Group, which is an inter-departmental steering group, provides a forum for the development and implementation of policy measures to enhance SMEs’ access to a stable and appropriate supply of finance.
The Supporting SMEs Online Tool, a cross-government initiative, where on answering 8 simple questions, the small business will receive a list of available government supports.
The Strategic Banking Corporation is an initiative designed to increase the availability of funding to SMEs at a lower cost and on more flexible terms than have recently been available on the Irish market.
The Credit Guarantee Scheme encourages additional lending to small businesses by offering a partial government guarantee to banks against losses on qualifying loans to eligible SMEs.
The Microenterprise Loan Fund provides support in the form of loans for up to EUR 25 000, available to start-up, newly established, or growing micro enterprises employing less than 10 people, with viable business propositions.
The Credit Review Office helps SME or farm borrowers who have had an application for credit of up to EUR 3 million declined or reduced by the main banks, and who feel that they have a viable business proposition. They also examine cases where borrowers feel that the terms and conditions of their existing loan, or a new loan offer, are unfairly onerous or have been unreasonably changed to their detriment.
The full country profile is available at https://doi.org/10.1787/fin_sme_ent-2017-27-en
Israel
Small and medium enterprises (SMEs) constitute the overwhelming majority of business enterprises in Israel. As of 2014, there were 504 224 businesses in the country, 99.5% of them were SMEs which employ up to 100 workers
Data on SME lending from the five major banking groups indicates a consistent increase in the volume of bank credit to SMEs. Since 2007, there has been a combined increase of 34% of bank credit to small firms (including a sharp decrease in 2009).
Since 2016, the Bank of Israel collects data from the banks of the credit issued, deposits and interest rates by firm segment. In February 2016, the SME interest rate was at 3.02% and the interest rate spread between SMEs and large firms was at 1.1%.
The high-tech industry is the leading beneficiary of venture capital investments, receiving almost all of this equity. 2015 was the most prolific year for high-tech capital raising activity in Israel – 708 deals accounted for USD 4.43 billion – the highest annual amount or number of financing rounds ever recorded. VC-backed deals accounted for 72% of capital raised in 2015.
SME and entrepreneurship policies in Israel are primarily designed by the Ministry of Economy and implemented by its Office of the Chief Scientist (OCS) and the Small and Medium Business Agency (SMBA). While the OCS has a longstanding presence in the Israeli policy framework and focuses on R&D policy, mainly for technology-based start-ups, the SMBA has recently been established to cater to SMEs in all sectors through business management training and coaching, subsidised access to finance (through the management of the national loan guarantee programme), and a new network of business support centres (MAOF centres) which is based on 35 branches across the country.
In late 2015, the government loan guarantees programme for SMEs was expanded, so as to incorporate institutional organs into the fund, along with the private banks. In addition, two private equity funds for growth capital investment in medium businesses were established in 2015.
The full country profile is available at https://doi.org/10.1787/fin_sme_ent-2017-28-en
Italy
The Italian economy is dominated by SMEs and, more than the EU average, by micro-enterprises. Over the last few years, micro and, most notably, small firms were hit hard by economic downturns: the latter experienced a steep drop in terms of number, employment and, to a slightly lesser extent, value added.
Helped by a recovering economy, the decline in total business loans virtually halted in late 2015. SME lending still fell during the year, resulting in a slight drop in the share of SME loans in overall corporate lending, but signs of improvement became evident for the SME lending market as well.
Credit standards further eased in 2015 and the first half of 2016, albeit collateral requirements, which increased steadily throughout the crisis, kept rising in 2015. The average interest rate charged to SMEs also declined in every year since 2012, standing at historically low levels in 2015. The interest rate spread between SMEs and large enterprises stabilised.
As a legacy of the long and deep recession, bad debts remained relatively high in 2015, partly fuelled by lengthy credit recovery procedures. Nonetheless, signs of improvement in credit quality were observed. The Italian government also enacted reforms to speed up credit recovery times.
On the equity financing side, early stage and expansion capital investments for SMEs kept largely constant in 2015, while resources devoted to firms of all sizes plummeted by almost two-thirds.
Payment delays, on a declining path since 2012, confirmed this trend in 2015. In the same year, bankruptcies were down by 6.1%, marking a break with preceding years.
The Central Guarantee Fund continued to be the main means of support for SME financing in 2015, with just under EUR 70 billion of loans activated since 2009. Its activities expanded strongly over the period in response to the upsurge in borrowers’ credit risk and thanks to the progressive increase in its endowment, the inclusion of additional categories of potential beneficiaries, the easing of eligibility criteria and the provision of a government backstop guarantee.
Between 2009 and 2015, the financial resources made available through debt moratoria and the interventions of the Central Guarantee Fund and the Deposits and Loans Fund amounted to over EUR 110 billion, just under 10% of disbursement of bank loans below EUR 1 million over the same period.
The full country profile is available at https://doi.org/10.1787/fin_sme_ent-2017-29-en
Japan
Lending to SMEs decreased continuously between 2007 and 2012, by 6.6% in total. 2013 saw a reversal of this trend, with outstanding SME loans picking up again by 1.5%, then by 1.8% in 2014, and by another 2.7% in 2015, reaching JPY 258.4 billion and thus almost back at its 2007 level.
The decline of the total outstanding stock of loans was more pronounced for SMEs than for large business loans in the aftermath of the financial crisis. Moreover, the recovery regarding the amount of outstanding loans to large enterprises is more evident than for SMEs. As a result, the share of SME lending to all enterprises decreased from almost 70% in 2007 to slightly over 65% in 2015.
Average interest rates on new short-term loans in Japan were very low and continuously declined between 2007 and in 2015, halving from 1.6% to 0.8%. Long-term interest rates on new loans followed a broadly similar pattern, declining from 1.7% in 2007 to 0.94% in 2015, and were thus only slightly higher than short-term interest rates.
Japanese venture capital investments were at a height in FY 2007 at JPY 193 billion, and decreased by 29.5% and by a further 36% in FY 2008 and 2009, respectively. Total investments recovered in FY 2010 and 2011, but were down again in FY 2012. In FY 2013, venture capital investment added up to JPY 181 billion, thus approaching their pre-crisis level. In reversal, 2014 saw once more a decrease by 35% compared to the previous year, but volumes recovered again in 2015, increasing by 11.1% up to JPY 130 billion.
Leasing volumes to SMEs plummeted in the aftermath of the financial crisis by almost 40% between 2007 and 2009. Between 2010 and 2013, leasing volumes recovered year after year. In 2014, leasing volumes decreased again for the first time by 11% compared to the previous year, but increased once more in 2015, reaching JPY 2.6 billion, remaining still well below 2007 levels, however.
SME bankruptcies increased by 10.8% in 2008, to 15 523. As the financial crisis subsided, the number of bankruptcies also dropped year after year, reaching a low of 8 806 in 2015, almost 43% lower than their peak in 2009.
Total non-performing business loans have been in continuous decline since 2013, after showing an erratic movement over the 2007-12 period, declining from 2008-10 and then increasing again over the following two years, peaking at JPY 17 523 billion in 2011. In 2015, total NPLs declined by 8.9%, down to JPY 14 406 billion.
The Japanese government offers substantial financial support for SMEs, such as a credit guarantee programme and direct loans. In March 2016, while the total amount of lending outstanding for SMEs was approximated at JPY 219 trillion (provided by domestically licensed banks and credit associations), the outstanding amount of the national credit guarantee programme amounted to JPY 25.8 trillion and the outstanding amount of the direct loan programme to JPY 21.6 trillion. The credit guarantee programme covers 1.4 million SMEs, and the direct loan programme 1 million out of 3.81 million SMEs.
The full country profile is available at https://doi.org/10.1787/fin_sme_ent-2017-30-en
Korea
SMEs constituted 99.9% of Korean enterprises in 2013, with the vast majority being micro enterprises employing up to 9 employees (93.2% of employer enterprises). In 2011, SMEs employed for the first time more than 50% of the country’s economically active population, with the number of SME employees standing at 1.3 million, according to Statistics Korea.
SME and total business loans increased over the period 2007-15 period by 51.7% and 78%, respectively. As loan growth for all business loans outpaced SME loan growth, the SME share of business loans declined from 86.8% in 2007 to 74.2% in 2015, which is still a high percentage by international standards, though.
The average interest rate charged on outstanding SME loans peaked in 2008 at 7.5%, then declined steadily to 4.7% in 2014, and decreased once more significantly to 3.9% in 2015 by 74bp, but still a relatively high interest rate compared with Western economies, which had taken loose monetary stances, in contrast to Korea.
Venture and growth capital investments declined between 2007 and 2008, as in other countries, but rebounded over 2009-11, exceeding their 2007 level. In 2015, venture capital investments grew strongly by 27.2% year-on-year, compared to 18.4% in 2014.
In 2015, payment delays again rose again somewhat to 9.2 days, but still well below the 12.1 days-level observed in 2008 and 2010. Bankruptcies decreased to 720 from 841 in 2014, by 14.3% year-on-year. It should be noted that while SMEs avoided bankruptcy because of the policies of the central and regional governments, they were still financially stressed due to low economic growth. The proportion of NPLs decreased sharply in 2011, decreased modestly over 2012-14, and decreased to 1.2% in 2015.
In 2015, the outstanding government guaranteed loans were at KRW 60.9 trillion which included loans that were backed by two nationwide funds. Direct loans provided by the SBC totalled KRW 3.9 trillion in 2015. These loans try to remedy market failures and enhance the competitiveness of SMEs. The Korean Government is now actively looking for other cost effective ways to support SME lending. In addition, it is planning on improving the policy-based financial system, in order to intensively support innovative small and medium enterprises via high-quality policy, rather than through quantitative expansion. For example, the new fund of funds for the Creative Economy (which is the current administration’s main focus), that started to invest in innovative SMEs in 2014, raised additional funds worth of KRW 1.6 trillion in 2015.
The Bank of Korea raised the ceiling on its key loan facility for small and medium-sized enterprises by KRW 5 trillion in 2015. Additionally, as Korea’s National Assembly has passed the legislation to legalise crowdfunding, SMEs can easily access equity financing through crowdfunding. Moreover, individual investors can diversify the investment on several SMEs without any additional operational cost.
The full country profile is available at https://doi.org/10.1787/fin_sme_ent-2017-31-en
Luxembourg
In 2014, SMEs made up 99.5% of all non-financial business economy firms. SMEs employed approximately 68.5% of the labour force.
Large new loans to enterprises continue to decrease since 2008. In 2015, large loans were nearly one third of their amount in 2008. New loans to SMEs (defined as loans of less than EUR 1 million) were generally also decreasing over this period, but to a lesser extent in 2015. As a consequence the share of new loans to SME in 2015 increases up to 14%, not far from the peak value of 16% observed in 2011.
In 2015, the interest rate for SMEs amounted to 1.89%, down from 5.52% in 2007. The interest rates for SMEs remained systematically higher than the interest rate for large corporations for the period 2007-15 with a gap of 47 basis points in 2015. This spread may appear small in absolute terms but in relative terms, SMEs were paying 33% more than large corporation in interests.
Alternative forms of financing (venture capital, factoring), are on the rise and may hold high potential for SMEs seeking finance. In 2015, nearly EUR 29 million of venture capital have been invested in Luxembourgish firms.
In 2015, 873 firms went bankrupt in Luxembourg. Bankruptcies per 1 000 firms declined to 7 in 2015, compared to 9 in 2014.
In 2016, the Luxembourgish Parliament adopted a bill introducing a simplified form of the société à responsabilité limitée (“S.à r.l.-S”). The simplified Sarl, also dubbed 1-1-1 companies (one person, one euro in one day) can be created more quickly with fewer start-up funds. The S.à r.l.-S is reserved to physical persons and intended to facilitate the start-up and development of new business activities.
The full country profile is available at https://doi.org/10.1787/fin_sme_ent-2017-32-en
Malaysia
SMEs represent the vast majority of firms in the Malaysian economy, outnumbering large enterprises, both in terms of number and employment. According to the latest 2011 Economic Census, SMEs account for 97.3% (or 645 136) of total business establishments.
The key role played by the financial system was reflected in the double-digit expansion of 13.8% in total financing outstanding, amounting to MYR 241 billion at the end of 2014, compared to MYR 211.8 billion in 2013. Outstanding SME loans continued to grow in 2015, albeit at a slightly slower pace than in 2014, increasing by 9.3% to MYR 263.5 billion. Similarly, the share of SME lending in total business lending increased to 45.9% in 2015, from 45.3% in the previous year, and from 43.6% in 2013.
The annual average lending rate on SME loans by banking institutions (BIs) increased significantly in recent years, from 5.8% in 2013, to 7.2% in 2014, and further up to 7.4% in 2015. This represents an increase of 160 basis points over this period.
As of end December 2015, there were a total of 121 registered venture capital corporations in the country, with a total of MYR 7.1 billion in committed funds under management, which represented an increase of 15.2% year-on-year. Investments made in 2015 increased by 14.8% to MYR 365 million, from MYR 318 million in 2014.
In 2015, the Credit Guarantee Corporation Malaysia Berhad (CGC) approved a total of MYR 1.7 billion worth of Portfolio Guarantees (PGs), which made up 50% of total loan approvals.
Impaired financing, a proxy for non-performing loans, of the overall financial sector stood at 3.2% of total business loans, remaining constant compared to 2014 and improving from 3.7% in 2013. Despite the rapid expansion of bank credit to SMEs, SME impaired financing substantively decreased from a peak of 7.5% in 2010, to 3.3% in 2015, and was thus almost on par with the share of large firms.
Since its inception in 2004, the National SME Development Council (NSDC) has continued to steer SME development in Malaysia by setting the strategic direction, and by formulating policies to promote the growth of SMEs across all economic sectors. The success of the NSDC can be measured through a number of outcomes, including the adoption of a national definition for SMEs, developing an SME database and statistics, monitoring and analysing SME performance to facilitate policy formulation, streamlining dissemination of information on SMEs, developing the SME financial infrastructure and endorsing the formulation of an SME Masterplan.
There is an emergence of new market-based funding to meet SMEs’ changing needs, particularly within new growth areas and for innovative of Malaysian SMEs. The advent of Financial Technology (FinTech) is transforming the financial landscape. These developments are expected to open up greater financing options for SMEs, including an equity crowdfunding framework, investment account platforms (IAP) and peer-to-peer (P2P) lending.
The full country profile is available at https://doi.org/10.1787/fin_sme_ent-2017-33-en
Mexico
There are 4 million SMEs in Mexico, which account for 99.7% of all private enterprises, representing 62.6% of private-sector employment and 35.2% of national total gross production.
Lending to SMEs gained importance in recent years, with total bank credit growing at an average annual real rate of 12% over the 2009-14 period. The number of SMEs obtaining a bank loan increased from 248 000 in 2009, to 316 000 in 2014. This growth coincided with an increase in the average loan amounts.
The interest rate depends on the size of the company and credit type. For large companies the average interest rate lies between 6% and 7% for simple and revolving credit, respectively. For SMEs, the rate oscillates between 10% and 11% for the same products, while business credit cards have an average annual rate of 13.43%, making them the most expensive product for SMEs.
Lending to SMEs gained importance in recent years, with outstanding SME loans growing at an average annual real rate of 12% in the 2009-14 period. This trend continued in 2015, with outstanding SME loans growing by 11.7% year-on-year. The share of SME outstanding loans in total business loans has remained relatively constant at around 23.8% since 2012.
Over the last couple of years, the Mexican Government has developed a number of initiatives to support entrepreneurs and strengthen SME access to finance in particular, including programmes to promote youth and female entrepreneurship, as well as various measures to strengthen alternative financing instruments, most notably SMEs’ use of venture capital.
Since 2011, the Mexican Government incentivises commercial banks to extend credit to entrepreneurs with feasible projects by covering 100% of the credit risk during the first two years of the credit term, and then 75% for the third and fourth years for enterprises eligible for the Financing Programme for Entrepreneurs.
Likewise, it has become possible to develop programmes that leverage credit in sectors that have hitherto been disregarded, such as the construction industry, travel agencies, real estate development SMEs, rural tourism SMEs, small contributors, and government-supplier SMEs, among others.
Moreover, the increased competition between financial intermediaries has generated a significant improvement in credit conditions, such as longer loan maturities, lower interest rates, and in most cases (9 out of 10), the absence of security interest.
The full country profile is available at https://doi.org/10.1787/fin_sme_ent-2017-34-en
The Netherlands
The largest part of the Dutch business population consists of SMEs, employing almost two-thirds of the labour force.
Despite an uptick in economic activity in 2015, new loans to SMEs declined by 6.7% year-on-year in 2015. In contrast, the outstanding stock of all corporate loans rose by 6.4% in the same year.
In 2015, the interest rate for large enterprises declined by 40 basis points on a year-to-year basis, while the average interest rate charged to Dutch SMEs increased by 30 basis points, resulting in a sharply widening interest rate spread of 2 percentage points.
Only 29% of SMEs reported having to provide collateral when applying for a bank loan in 2015, a sharp decrease from 2014.
The number of loans authorised in full shows a great increase from 2013 on. The 2013-14 year-on-year growth rate was 18.5%, and in 2014-15 even 39%.
Venture capital investments in the Netherlands almost doubled between 2013 and 2015.
Crowdfunding investments rose from EUR 14 million in 2012 to EUR 128 million in 2015.
Payment delays, as well as the number of total bankruptcies declined substantially between 2014 and 2015, illustrating the improved health of the Dutch economy.
Loan guarantees were up in 2015, especially for SMEs. Presumably this is driven by the increasing demand for credit. The Guarantee Scheme for SMEs (BMKB) assists SMEs that have a shortage of collateral to obtain credit from banks, while the Growth Facility (GFAC) offers banks and private equity enterprises a 50% guarantee on newly issued equity or subordinated loans, while the Guarantee for Entrepreneurial Finance (GO) guarantees new bank loans.
In October 2015, the Dutch Investment Institution (NLII) was founded by a group of Dutch institutional investors, which introduced a subordinated loan fund of EUR 300 million with at least the same amount co-financed by bank loans. Besides the subordinated loan fund, NLII introduced the Business loan fund. This fund, with a size of EUR 480 million, will also be co-financed by banks for at least 50%.
The government of the Netherlands also undertook a number of measures to improve alternative sources of financing, such as the establishment of a fund of funds for later stage venture capital investments, a micro-credit institution, the provision of seed capital by regional development agencies and the Business Angel co-investment fund.
The full country profile is available at https://doi.org/10.1787/fin_sme_ent-2017-35-en
New Zealand
Bank lending to businesses in 2015 lifted sharply, rising by another 6% above its all-time high level of the previous year. SME lending increased by 6.3% in 2015 to NZD 36.5 billion. The 2015 lending rate was 18% higher than the 2010 low following the global financial crisis (GFC).
In 2015, the interest rate for bank lending to SMEs the interest rate reduced to 9.4%, its lowest rate since this report commenced.
Rejection rates increased strongly over the post-crisis period, more than doubling between 2007 and 2008, and then increasing further over the following two years. In 2010, almost a quarter of SME loan applications were rejected. Rejection rates then decreased again markedly over the 2011-15 period and at 7.4% in 2015, they had almost fallen back to their pre-crisis level.
Venture capital and angel investment increased to NZD 62.5 million and NZD 61.2 million, respectively, in 2015. Around 64% of angel investment in 2015 was made in software and services.
The first full year of licensed equity crowdfunding activity saw four licensed operators raise NZD 14.9 million of retail investment for 27 companies.
In 2015 the proportion of non-performing loans for all business compared with SMEs was about the same.
The government has no general loan guarantee facility or direct loan programme for SMEs, although there is a working capital guarantee for exporting SMEs. This programme is delivered through the New Zealand Export Credit Office (NZECO). In 2016, the Government made changes to the mandate and some operational criteria and products to enable NZECO to support a wider range of SME firms and larger exporters, while helping NZECO develop a more diversified risk portfolio.
The Financial Markets Conduct (FMC) Act came into force in April 2014 and seeks to help improve access to capital by raising investor confidence. It reduces compliance costs for some SMEs through clearer disclosure regulations, including exemptions from full disclosure requirements for some firms. It also permits new forms of capital-raising, such as crowd-funding and peer-to-peer lending. The Government actively monitors the implementation of the FMC Act and has issued 75 regulatory instruments to improve its functioning since its enactment in 2014.
The full country profile is available at https://doi.org/10.1787/fin_sme_ent-2017-36-en
Norway
97% of all firms in Norway employ less than 50 people. The SME definition in Norway differs from the definition in use in most EU countries.
After two years of decline, the outstanding stock of SME loans rose in 2014 by almost 10% year-on-year and by more than 11% in 2015. SME lending made out a larger share of overall business lending in 2015 compared to previous years.
Short term lending to SMEs as a share of overall lending to SMEs increased in recent years, but the vast majority of SME lending is long-term, possibly due to the strength of legal rights and the depth of credit information in Norway.
Credit standards have tightened between the first quarter of 2015 and the second quarter of 2016, after several years of easing. Demand for credit has weakened considerably since the second half of 2015.
As opposed to previous years, venture and growth capital investments contracted in 2015, decreasing by 4.75 %, and thus standing in contrast to the strong, double-digit growth observed in 2013 and 2014.
After an uptick in the number of bankruptcies in 2013 and 2014 by 16.3% and 3.1% year-on-year respectively, bankruptcies went down by 1.9% in 2015.
In 2015, the Norwegian government introduced a new action plan for entrepreneurship. The plan outlines the government’s policies to improve conditions for starting and developing new businesses in Norway, with an emphasis on capital, competence and culture. The action plan has a wide-reaching set of actions, including increased entrepreneurship grants; it strengthened the financing of commercialisation of publicly financed research, established new seed capital funds, and introduced a pre-seed capital fund that will invest in young companies in collaboration with private investors.
The full country profile is available at https://doi.org/10.1787/fin_sme_ent-2017-37-en
Portugal
In 2014, SMEs comprised 99.7% of enterprises in Portugal and employed 80.2% of the labour force.
In 2015, the global stock of business loans decreased by 3.2% year-on-year, slightly below the decrease in SME lending which stood at 3.7%. The decline was thus less pronounced than in 2014 which saw a drop of more than 5% for both total and SME outstanding loans. The share of SME loans in total business loans remained slightly above the 80% level
The decline in SME lending was more pronounced in short-term SME loans, having dropped by 65.5% over the 2009-15 period, and registered a further 12.3% decrease in 2015 compared to the previous year, whereas long-term SME loans decreased by only 2.7% year-on-year.
The share of government guaranteed loans in total SME loans grew significantly, from 5.4% in 2009 to 8.2% in 2015, demonstrating the sustained public efforts to support SME access to finance.
The average interest rate for SME loans decreased to 4.6% in 2015, marking the third year in a row where this value was in decline, which peaked at 7.6% in 2012. The interest rate spread between SMEs and large firms increased from 1.9% in 2009 to 2.2% in 2012, and has similarly been on a decrease since, to 1.6% in 2014 and further down to 1.35% in 2015, indicating an improvement in SME financing conditions
After a continuous decline since 2007 in venture capital investments, there were signs of recovery since 2012, with total venture capital investments in 2015 having increased again by 438% to EUR 70 million compared to their 2011 value.
Payment delays rose from 35 days in 2009 to 41 days in 2011, and then almost halved again from 40 days in 2012 to 21 days in 2015.
Following four years of continuous increase in the number of bankruptcies (2009-12), 2014 ended with a significant and encouraging reduction of almost 34% in comparison with 2012, a value which however rose again by 17.3% in 2015, to 4 714
In the framework of anti-crisis measures adopted by Portugal, SMEs’ access to finance has been a major priority for the government. In this context, twelve “SME Invest and SME Growth” credit lines to facilitate SME access to credit were launched. These credit lines, with a total stock of bank credit of EUR 15.8 billion, have long-term maturities (up to 7 years) and preferential conditions, partially subsidised interest rates and risk-sharing public guarantees, which cover between 50% and 75% of the loan. These credit lines aim to support fixed investment as well as SME working capital.
In August 2016, the Portuguese government launched Program Capitalizar, comprising over 60 new measures, that aims to assess the constraints that limit firms’ access to equity financing instruments.
The full country profile is available at https://doi.org/10.1787/fin_sme_ent-2017-38-en
Russian Federation
SMEs in the Russian Federation are defined differently than in EU countries, hindering international comparisons.
SMEs play a smaller role in the Russian economy than in most other countries, employing around 30% of the workforce and contributing to 21% of GDP.
In 2016, the government approved the State Strategy of SMEs Development of the Russian Federation. It aims to expand the SME sector so that it would generate 40% of Russian GDP by 2030.
SME loans doubled between 2008 and 2013, both in terms of new loans approved, as in terms of the outstanding stock of loans. In 2014, however, this upward trend was reversed and new lending started to decline, accelerating in 2015. New lending to all businesses, by contrast, rose in 2014 and fell less in 2015, resulting in a declining share of SME loans to total corporate lending.
Lending conditions loosened a lot in 2014, but this trend reversed in 2015 and the first quarter of 2016. The demand for credit is in a broadly declining path since the beginning of 2014.
Interest rates charged to SMEs are high by international comparison and rose between 2014 and 2015. The interest rate spread between loans charged to SMEs and to large enterprises also increased in 2015. Both trends appear to have been reversed, however, according to data from the first quarter of 2016.
In contrast to most scoreboard countries, venture capital activities have been on the increase between 2008 and 2014, investments doubling over this period. Venture capital investments declined in 2015, however, as some foreign investors left the Russian market.
Non-performing SME loans almost doubled between 2014 and 2015 and make up 13.2% of all SME loans in 2015.
In 2014, the Russian Government established the Credit Guarantee Agency. The new agency aims to provide guarantee support to SMEs.
In 2015, the Federal Corporation on SME Development (Corporation) on the basis of the Credit Guarantee Agency, was set up. It provides a host of services, in addition to financial support. The volume of issued guarantees from Corporation is RUB 23 billion (EUR 310 million).
The SME Bank provides its assistance to SMEs via a number of regional commercial banks and non-bank financial institutions: leasing companies, micro-financing organisations, regional SME support funds, factoring companies and other organisations. The volume of total loans under the programme as of 1 January 2016 reached RUB 105.7 billion.
The full country profile is available at https://doi.org/10.1787/fin_sme_ent-2017-39-en
Serbia
The Serbian economy is dominated by SMEs. In 2014, SMEs were employing almost 65% of the labour force and accounted for 56% of total gross value added, and for 44.8% of total exports. Between 2007 and 2014, the relative number of micro-enterprises rose, while the proportion of medium-sized firms declined.
In 2014, and in contrast to previous years, outstanding SME loans expanded by 15%, the average maturity rose, and SME loans increased their share in overall corporate lending. New lending to SMEs increased by 19.5%, and interest rates fell mainly due to government subsidised loan programmes. All of these positive trends continued in 2015. Although the government subsidised lending programme were terminated at the end of 2014 and these loans were maturing in 2015, the outstanding stock of SMEs loans continued to grow by 12.6% in 2015. In addition, the outstanding stock of SME long-term loans increased by 20.7% as a result of the strong impulse of corporate lending of investment loans.
Interest rates continued to decrease as well as the percentage of SMEs that were required to provide collateral. As a result of stronger monetary policy relaxation, that started in May 2013, the average interest rate on loans denoted in the local currency decreased by 600 basis points in over the 2013-15 period and stood at 12.3% in 2015. Over the same period the average interest rate charged to SMEs in foreign currencies decreased by 190 basis points to 6.6%, thus continuing a generally downward trend since 2007.
According to a survey conducted by the Statistical Office of the Republic of Serbia, SMEs’ main source of financing comes from own funds, although every third SME is using external sources of financing, mostly bank lending (over 40%), as well as borrowing from friends and family members. Even though the regulatory framework for venture capital (VC) is still not in place in the Republic of Serbia, there are some sporadic investments of VC and equity funds established abroad. Activities of the West Balkans Enterprise Development & Innovation Facility programme (WB EDIF), mainly funded by European Commission, are thus of great significance for future progress and investment increases in the VC area.
According to data from the bank survey on SMEs lending, over the 2008-13 period SME non-performing loans as a share of total outstanding SME loans increased from 10.6% in 2008 to 28.4% in 2013, and a slight decrease has been observed in 2014 (to 28%) and in 2015 (to 27.7%). The share of non-performing loans to all business loans in 2015 also decreased to 21.7% from 24.6% in 2014.
At the beginning of 2015, the Government of the Republic of Serbia adopted the Development Strategy for Small and Medium Enterprises, Entrepreneurship and Competitiveness for 2015-20, which is a medium-term framework for SME and enterprise development policy for the coming period. The access to sources of financing pillar of the strategy presupposed several measures. The objective of these measures is to make loans to SMEs accessible under advantageous conditions as well as the implementation of the training in the field of financial management, in particular: improvement in the quality of offer of the banking sector to SMEs; development of new financial instruments; improvement of ability of SMEs to access various sources of financing.
The full country profile is available at https://doi.org/10.1787/fin_sme_ent-2017-40-en
Slovak Republic
SMEs dominate the Slovak economy, covering 99.5% of the enterprise population in 2015. Comparing to previous year there has been reported decrease of the number of SMEs by 13.25% which is a consequence to the changed methodology for monitoring of active enterprises.
Because of different SME definitions used in Slovak banking statistics and in the Tax Authority’s financial statements database, it is not possible to provide harmonised and comparable data for all indicators. Total SME lending has been increasing constantly since 2011, as evidenced by banking statistics, and less significantly by the statistics from the financial statements database. Based on banking statistics, SME lending increased by 5.8% year-on-year in 2015, which is higher than the year before (3.6%), but remained below 2008 levels. The increase in new SME lending in 2015 (by 18.6%) took place despite the overall drop in new loans (-5.8%). There was a modest growth in the stock of short-term loans for SMEs from 2011, while outstanding long-term SME loans stagnated.
General business interest rates plummeted from 5.5% in 2007 to 3% in 2009, but rose again to 3.2% in 2010-11. Since the start of separate SME statistics in 2015, SME interest rates stagnated around 3.8%, however, and in 2015 decreased slightly to 3.4%, thus indicating a certain improvement of credit conditions and easier access of SMEs to bank financing. Interest rates for self-entrepreneurs were at 6% in 2012, increased slightly to 6.2% in 2013, and declined in the forthcoming years to 5.3% in 2015.
According to the survey on the use of external forms of funding realised at the end of 2015, less than a quarter (24%) of Slovak SMEs use alternative sources of financing, most of them leasing. The share of venture capital financing was only 2%. At the same time, venture capital investments in 2015 rose by 41%, mainly caused by the launch of venture capital instruments within the EU JEREMIE initiative. As not all of the funds allocated have been committed, a further increase of funding from these instruments is expected in the forthcoming year.
The share of non-preforming SME loans in 2015 decreased slightly less (-12.6%) than overall business non-preforming loans (-14%), but the difference between the two rates is derogating. SMEs account for the lion’s share of total bankruptcies, covering 98.9% of the total in 2015, up from 94.2% in 2012. The decrease in the number of bankruptcies by 14.4% year on-year in 2015 was probably caused by improved conditions in the economy and higher demand.
In the Slovak Republic, there are financing instruments providing loans and guarantees for SMEs operated by specialised state banks and the Slovak Business Agency (SBA). In addition to that there are financing instruments targeted specifically to SME implemented within JEREMIE initiative that progressed in 2015, after their successful launch in 2014. As a consequence the amount of government loan guarantees in 2015 represented an increase by a factor of 2.3, compared to the previous year. Similarly, there was a year-on-year increase in government guaranteed loans by 31%, as well as in direct government loans by 7.7%.
The full country profile is available at https://doi.org/10.1787/fin_sme_ent-2017-41-en
Slovenia
In 2015, 99.6% of all firms in Slovenia were SMEs and 89.1% of firms employed less than 10 employees.
While SME lending increased between 2007 and 2011, it more than halved between 2011 and 2015, decreasing from EUR 9.8 billion in 2011 to EUR 4.1 billion in 2015. Over this period, short-term SME lending declined more than long-term SME lending; short term SME loans accounted for 32% of SME loans in 2011, compared to 15% in 2015. Total business loans rose between 2007 and 2010, but fell afterwards, however not as dramatically as SME loans.
Interest rates for SMEs declined in recent years, from 6.4% in 2011 to 4.5% in 2015 for short-term loans, and from 6% in 2011 to 4.3% in 2015 for long-term loans, but not as much as in most other Eurozone countries, thus remaining at relatively high levels. The interest rate spread between bank loans to large enterprises and to SMEs for short-term lending rose in recent years, from -0.02% in 2011 to 0.4% in 2015. The interest rate spread for long-term loans decreased between 2010 (1%) and 2013 (0.2%), but rose again slightly in 2014 to 0.9%. Large enterprises enjoyed overall better credit terms.
Direct loans are mostly provided by Slovenian Investment and Development Bank (SID) as well as by public funds such as the Slovene Enterprise Fund (SEF), the Slovenian Regional Development Fund and the Housing Fund. The Ministry of Economic Development and Technology provides credit guarantees and interest rate subsidies through the Slovene Enterprise Fund.
At the end of 2009, the Slovenian Enterprise Fund introduced a new programme of financial engineering instruments for SMEs 2009-13 (PIFI) which was adopted by Slovene Government. The PIFI programme combines different financial instruments such as debt and equity instruments.
Slovenia is also preparing a new system of managing and implementing the financial instruments over the period 2014-20. The new model of implementing financial instruments through fund of funds is based on the ex-ante analysis that determined five areas of financial gaps: SMEs, RDI, urban development, energy efficiency and agriculture.
The full country profile is available at https://doi.org/10.1787/fin_sme_ent-2017-42-en
Spain
SMEs form the backbone of the Spanish economy, accounting for 99.7% of all firms and for 63.4% of the business labour force.
The financial crisis had a pronounced negative impact on SME financing in Spain. Buoyed by a recovering economy, a reversal of trends in SME lending took place in 2014, and gathered further strength in 2015, with new lending to SMEs up by 12.2% compared to 2014.
In addition, firms’ debt levels decreased, which together with the growth in their operating results, prompted a further decline in their debt and interest burden ratios.
The expansionary monetary policy of the European Central Bank appears to have had an impact on financing conditions for SMEs as both, the average interest rate charged to SMEs, as well as the spread with the interest rate charged to large enterprises, went sharply down in 2015. Other indicators, such as collateral requirements, also point to an easing in financing conditions for SMEs.
Bankruptcies continued their downward trend in 2015, both because of various insolvency legislation reforms that have stimulated agreements between creditors and debtors, as well as due to the improving health of the Spanish economy.
In 2014, venture capital investments remained broadly stable compared to the previous year.
In Spain, many institutions provide support to ease SMEs’ access to finance. Personal income tax incentives and other measures aim to support investment in newly created firms or those listed on an alternative markets. Evaluating the effectiveness and efficiency of these measures through cost-benefit-analyses, as well simplifying the current framework, may improve policy making in this area.
The Official Credit Institute (ICO) has financing programmes such as its so-called líneas de mediación (credit intermediation facilities), which are loans that are studied and granted by credit institutions, the role of the ICO being to provide liquidity.
The Centre for Industrial Technological Development (CDTI) is a public enterprise, whose main activity consists in evaluating and financing research projects, usually of SMEs, with a high technological content, and usually in providing loans.
In January 2015, the European Investment Bank and the European Investment Fund launched a lending facility specifically aimed at SMEs and the self-employed for investment projects in Spain, in which they assume 50% of the borrower’s credit risk. The public contribution budgeted for this initiative was EUR 800 million.
The full country profile is available at https://doi.org/10.1787/fin_sme_ent-2017-43-en
Sweden
99% of all enterprises in Sweden are SMEs, accounting for 60% of employment and 48% of value added. Most SMEs operate in the services, wholesale trade and retail, and construction sectors.
The stock of SME debt to banks and other financial institutions was SEK 1 003 billion in 2014 (up by 4.1% in comparison to 2013). SME debt as a share of total outstanding debt was 35.7% in 2014, up by 0.3 percentage points compared to the previous year.
Surveys of bank managers’ views on business loan volumes indicate that loans to SMEs have been increasing since Q1 2012; this development corresponds with decreasing interest rates on bank loans over the period.
The Swedish Central Bank (Sw. Riksbanken) continuously increased the repo rate up until the eve of the financial crisis. As the crises hit, the rate was lowered in steps until it reached a low of 0.25%. It stayed at this level for a year before the Central Bank started to increase the repo rate again towards the end of 2010. The repo rate reached 2% in mid-2011. Since then, it has only stagnated or lowered. In February 2015, the Central Bank introduced a negative policy rate of -0.10%; the rate has since decreased even further and was at -0.50% in July 2016. The difference in interest rates between small and large enterprises (proxied by loans above and below EUR 1 million) has decreased significantly since its peak of 1.29 percentage points in 2011, and was 0.31 percentage points in Q1 2016.
Private equity fund investments in Swedish companies in the “venture” and “growth” stages were the lowest ever measured in 2015, amounting to EUR 273 million.
Almi’s lending increased by 38% in 2015. Almi explains this as a consequence of “a conscious effort to increase funding in early stages, where the lack of private capital is greatest”. The Swedish National Export Credits Guarantee Board issued guarantees for SEK 2.5 billion to SMEs in 2015, compared to SEK 1.4 billion in 2014, representing an increase of 79%. This is attributed to “recent efforts to reach out to more SMEs.”
As regards new policy developments in SME financing, the Swedish parliament (Riksdag) adopted in June 2016 a proposal concerning the structure of public financing for innovation and sustainable growth (the government’s bill 2015/16:110). One aim of this new structure is to clarify and simplify the current system of state VC-financing. The new structure also aims to utilise public resources within the area better and thereby contribute to the development and renewal of the Swedish industry. The new structure means, among other things, that the government establishes a new, joint stock company, Saminvest AB, which will be a “funder of funds”, and invest in companies in the development stages through privately managed VC-funds. Saminvest AB is expected to begin its operations during 2017.
The full country profile is available at https://doi.org/10.1787/fin_sme_ent-2017-44-en
Switzerland
Only 0.7% of all Swiss enterprises are large and SMEs employ 69.9% of the labour force.
Switzerland experienced a slight deflation in 2015, resulting in a slow nominal GDP growth. Real GDP growth remained positive, but was significantly lower than in 2014.
Total outstanding SME loans rose slightly in 2015, down from previous years.
Over the 2007-15 period, SME loans expanded by 24.9%, while overall corporate lending rose by 30.7%
Lending standards remained stable in 2015, while the demand for credit decreased slightly.
Both the average interest rate charged to SMEs and the interest rate spread with large companies, rose in 2014 as well as in 2015.
Venture and growth capital investments rose rapidly in 2015. Per capita, Switzerland has one of the most developed and active VC markets in Europe.
Crowdfunding activities are increasing at fast clip, despite the lack of specific crowdfunding legislation. Recently, the government has taken steps to make the regulatory framework friendlier to the CF industry, as well as to fintech companies more generally.
Payment delays in the business to business sector have significantly decreased over the last years, passing from 12 days in 2008 to 7 days in 2015, illustrating that liquidity problems have diminished.
In Switzerland, there are four guarantee cooperatives that help promising SMEs obtain bank loans of up to CHF 500 000. Loan guarantees increased steadily in the period 2007-10, declined slightly in 2011, and continued to grow in 2012, 2013, 2014 and 2015. The guarantee scheme was restructured in 2007 allowing it to cover more risks, which in turn results in an increase of volume since then.
The full country profile is available at https://doi.org/10.1787/fin_sme_ent-2017-45-en
Thailand
There were close to 2.87 million SMEs (firms with less than 200 employees) in Thailand in 2015, constituting 99.7% of all enterprises and employing about 80% of the labour force, including agriculture. Most banks do not use the national SME definition. Instead, they use loan size as a proxy and definitions vary across banks.
A change in the methodology of collecting the scoreboard data was introduced in 2013 and has only been applied to the most recent 2015 data. For this reason, data from previous years are not comparable to 2015 data. Data for 2014 are not available.
Loans to SMEs increased by 67% over the 2007-13 period. In 2015, based on the new methodology, outstanding SME loans amounted to THB 4 457 billion, representing 71% of total outstanding business loans.
In 2013, the average interest rate for SMEs stood at 6.4%, down from its 2011 peak of 8.1%, and the spread charged between large firms and SMEs narrowed to 1.3%.
In 2015, the value of collateral provided by SMEs for SME business loans stood at 604%, or a total of THB 27,636 billion.
Scarce supply of venture capital continues to stifle the business momentum of innovative firms. The venture capital and private equity industry is small in Thailand and has focused on mergers, acquisitions and restructurings, rather than start-up and mezzanine finance.
In 2015, 3.86% of SME loans were non-performing, compared to 0.85% of all business loans.
The Small Business Credit Guarantee Corporation (SBCGC) provides credit guarantees to viable small businesses which do not have sufficient collateral. The SBCGC provides a letter of guarantee for approved applications to the financial institutions after the SME has paid the guarantee fee. In 2015, SBCGC outstanding loan guarantees amounted to a total of THB 309 billion.
The Market for Alternative Investments (MAI) was established in 1999. It provides a simpler and lower cost alternative to smaller firms than the Stock Exchange of Thailand (SET). As such, MAI provides an exit point for venture capital investors and facilitates capital raising by firms from institutional and sophisticated investors.
The full country profile is available at https://doi.org/10.1787/fin_sme_ent-2017-46-en
Turkey
SME lending grew very strongly over the whole 2007-15 period, with a minor decline of 1.6% in 2009 the only exception. The growth figure in 2015 amounted to 16.6%. As business lending to firms of all sizes grew even stronger in 2015, the share of SME loans fell.
Venture and private equity investments show an erratic pattern; between 2008 and 2011, investments increased by more than 600% for three consecutive years and peaked in 2011, after which a decline was observed. In 2015, venture and private equity investments rose slightly year on year and remain well above levels observed in 2011 and 2013.
Non-performing loans peaked in 2009 at 8.28%, and decreased afterwards. In 2015, there was a modest rise in NPLs among SMEs. In contrast to 2007, NPLs were more common among SME loans than among large business loans in 2015.
The number of bankruptcies increased from 99 firms in 2014 to 108 in 2015. Company closures, including sole proprietorships, totalled 56 684 enterprises in 2015, down from 87 474 enterprises in 2014, highlighting that bankruptcies (upon court verdict) constitute a relatively uncommon phenomenon in Turkey.
In 2012 and 2013, the Turkish Government enacted laws to stimulate the development of the business angel industry. This included the establishment of a legal framework and the provision of generous tax incentives for licensed angel investors.
The government also introduced regulation regarding funds of funds, which are able to receive funding from the Turkish Treasury under certain conditions.
KOSGEB constitutes the main body for executing SME policies in Turkey. It provides 8 different support programmes (SME Project Support Programme, Thematic Project Support Programme, R&D, Innovation and Industrial Implementation Support Programme, Entrepreneurship Support Programme, Cooperation and Collaboration Support Programme, General Support Programme, Emerging Companies Market SME Support Programme and SME Finance Support Programme) with considerable outreach throughout Turkey. In 2015, there has been a shift in KOSGEB’s activities from its credit interest support programme towards its credit guarantee scheme.
Many other initiatives to stimulate alternative sources of financing have been introduced in Turkey. These including the International Incubation Centre Programme and International Accelerator Programme, who provide a range of services to innovative ventures, several support measures to foster the venture capital industry in Turkey and measures to encourage the public listing of small and medium-sized enterprises in specialised vehicles.
The full country profile is available at https://doi.org/10.1787/fin_sme_ent-2017-47-en
United Kingdom
Net lending to SMEs remained positive throughout 2015. British Bankers Association (BBA) data shows total net lending to SMEs of GBP 2.1 billion in 2015, the first positive annual figure in this data series. The Bank of England (BoE) SME lending statistics show continued positive net lending in the first and second quarter of 2016. Whilst, gross lending within the United Kingdom has been trending upwards since 2013, it still remains below the pre-crisis peak. The SME lending stock contracted by 1.4% in 2015. This marks a continuation of a downward trend, beginning in late 2009. The stock of lending to corporations fell in 2015 at a similar rate, decreasing by 1.4%.
The combined rejection rate for SME loans and overdrafts fell from 21% in 2014 to 19% in 2015. This represents a change in the trend from the last 3-4 years, where the combined rate had risen from 27% in 2010, to 33% in 2014. Since 2012, the median interest rate for SME loans has consistently been falling – to 3.3% in 2015, i.e. 1.2 percentage points lower than in 2008.
There has been strong growth in alternative sources of finance. In 2015, the total value of leasing and hire purchase finance surpassed pre-financial crisis levels, having grown by approximately GBP 2.6 billion compared to 2014 (an increase of 12%). Peer-to-peer (P2P) business lending, enabled through online platforms, equally continued to grow, with gross flows of approximately GBP 1.3 billion recorded in 2015. Analysis of the UK equity finance markets shows that 2015 was a strong year for equity finance, with deal numbers increasing by 8% from 2014 to 1 408 and total investment value increasing by 54% to GBP 3.6 billion. Overall, however, UK equity markets have been showing signs of softening, with a decline in the number of equity deals since Q4 2015, which continued over the first three quarters of 2016.
The British Business Bank delivers most of the government’s programmes aimed at supporting SME access to finance through a range of financial facilities. It reviewed the “Enterprise Finance Guarantee” scheme during 2015/16, which led to several operational enhancements, along with the launch of a new asset finance type guarantee. The British Business Bank continues to deliver its “ENABLE” funding and guarantee programmes. As of 31 March 2016, the “ENABLE Guarantee” has supported 350 SMEs. In October 2015, the British Business Bank agreed to provide a GBP 100 million facility to Hitachi Capital UK to fund a portfolio of newly originated small business asset finance receivables. These were the first two transactions of the innovative ENABLE Funding programme, which aims to increase significantly the supply of leasing and asset finance to smaller businesses in the United Kingdom. In May 2016, British Business Bank launched the initial phase of the “Help to Grow” programme, and announced the first transaction with Lloyds Banking Group worth GBP 30 million. The Help to Grow programme will help smaller businesses to raise senior debt to fund their growth opportunities. To support equity finance, the “Enterprise Capital Funds (ECFs)” programme committed to two new funds over 2015-16. The ECF programme now has an overall investment capacity of over GBP 650 million.
In March 2016, the Chancellor announced the government’s intention to designate “Bizfitech”, “Funding Options” and “Funding Xchange” as finance platforms under the SME Finance Platform regulations. These platforms will match smaller businesses that have been declined finance by designated banks with alternative finance providers to help them access the funds they need to grow and expand.
The full country profile is available at https://doi.org/10.1787/fin_sme_ent-2017-48-en
United States
SMEs generate about half of the value added in the United States and account for 50% of the private-sector employment.
The US economy is doing relatively well in recent years, despite a slowdown in productivity and the occurrence of shocks in the economy, both within the country and abroad.
The birth rate of US companies is slowing down, and new firms start smaller than previously. Moreover, non-employer firms are making up a larger share of the overall firm population than in the past.
Lending to SMEs has declined dramatically in the aftermath of the financial crisis. In recent years, however, SME lending has picked up and is gaining momentum.
Lending to large enterprises has been growing faster than lending to SMEs has in recent years.
While interest rates for all businesses have come down since the financial crisis and have remained broadly stable since. The spread between rates charged at SMEs and at large enterprises has remained more or less constant in recent years.
Credit conditions to SMEs remained tight in 2015 and have even become somewhat stricter since.
Only half of small businesses applying for capital receive the full amount that they applied for, a proportion that rises to two-thirds for very small enterprises and start-ups. This points to a very significant funding gap for SMEs in the United States.
This funding gap has driven some small enterprises to seek financing at alternative sources such as online lenders. The satisfaction rate with borrowers at alternative lenders is very low, however, largely due to high costs and inflexible terms.
Venture capital investments were stagnant in 2014, but rebounded in 2015.
The Department of Treasury’s State Small Business Credit Initiative (SSBCI) began in 2010 as about a USD 200 million a year programme for seven years that co-funds state lending programmes.
The SBA (Small Business Administration) provides loan guarantees, which reached USD 4.5 billion in 2015 and is continuing a policy started in 2013, waiving loan guarantee fees for loans under USD 150 000. The SBA also launched the Impact Investment Fund in 2011 as a five-year, USD 1 billion pilot project to capitalise investment funds that seek both financial and social return and has increased the loan guarantee cap from USD 17.75 billion to USD 23.5 billion in July 2015.
Data collection on SME financing has improved in the United States.
The full country profile is available at https://doi.org/10.1787/fin_sme_ent-2017-49-en
The EIB Group
The EIB Group consists of the European Investment Bank (EIB) and the European Investment Fund (EIF). The EIB is the European Union’s bank; it is the only bank owned by and representing the interests of the European Union Member States. The EIF, which specialises in SME financing, is majority owned by the EIB with the remaining equity held by the European Union (represented by the European Commission) and other European private and public bodies.
Supporting access to finance for smaller businesses is one of the four public policy goals of the EIB Group. It represents the EIB’s single largest policy priority in terms of activity volume, and it is EIF’s sole mission. The two institutions provide a highly complementary offer of financial products to SMEs and Midcaps. EIB support to SMEs is provided both through funded and un-funded intermediated financing and loan substitutes, as well as direct growth finance to mid-caps. The EIF provides SME risk finance via financial intermediaries, incl. equity, mezzanine, guarantees, microfinance, and securitisations. Overall, the EIB Group’s financial support focuses on developing innovative products and partnerships that facilitate access to finance for SMEs and Midcaps at all stages of their development in a bid to boost employment opportunities.
In 2015, the EIB Group continued delivering record levels of support to SMEs and Midcaps with EUR 28.4 billion of new operations signed. This underlines the continued and strong commitment to SMEs and midcaps in the EU and beyond. The latest EIB Group SME Report gives an overview of the key messages and main achievements of the Group in 2015 (www.eib.org/infocentre/publications/all/sme-report-2015.htm) In addition, detailed information about the EIB Group’s SME activities can be found on the respective websites of the EIB (www.eib.org/projects/priorities/sme/index.htm) and of the EIF (www.eif.org).
The EIB Group support to SMEs and Midcaps is highly relevant in terms of policy priority and added value to both final beneficiaries and financial intermediaries. In 2015 alone, signatures/commitments in the EU of EUR 25.6 billion with some 850 intermediaries are estimated to have leveraged over EUR 64bn of finance. This in turn supported an estimated EUR 97 billion of investments by SMEs and MidCaps. Allocations of EIB Group finance in 2015 alone supported 234 000 SMEs and MidCaps employing over 3.8 million people.
The EIB Group effectively reaches SMEs through an increasingly wide range of predominantly intermediated debt-financing, risk-sharing products (guarantees, securitisation), mezzanine and venture capital/private equity instruments aimed at improving financing conditions and enabling continued access to finance. This includes as well the support of new market developments. Examples are the Group’s involvement in:
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the first European securitisation transaction of loans to small business originated via a peer-to-peer lending platform (www.eif.org/what_we_do/guarantees/news/2016/funding-circle.htm?lang=-en);
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direct support to microfinance in Europe (www.eib.org/infocentre/press/releases/all/2016/2016-002-investment-plan-for-europe-eib-group-supports-micro-financing-in-the-netherlands-with-qredits.htm?f=search&media=search) ;
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investments in digital financial services (www.eif.org/what_we_do/equity/news/2016/eif_ anthemis_venture_fund.htm?lang=-en);
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the implementation of the SME Initiative, in cooperation with the EC, in several EU member states (www.eib.org/infocentre/press/releases/all/2016/2016-250-romania-implements-sme-initiative-eur-580m-for-romanian-businesses.htm);
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doing business via technology driven financing platforms, or (www.eif.org/what_we_do/guarantees/news/2015/Cosme-efsi-iwoka.htm?lang=-en).
Furthermore, the EIB’s advisory services complement financing activities for the benefit of SMEs, notably in the context of the implementation of the Investment Plan for Europe with the set-up of the European Investment Advisory Hub (www.eib.org/infocentre/videotheque/introducing-the-european-investment-advisory-hub.htm). The IPE is nowadays a main focus area in terms of development of the EIB Group’s activities going forward.
The Investment Plan for Europe, EFSI, and the support for SMEs and Midcaps
In late 2014 the European Commission proposed an Investment Plan for Europe, which aims to revive investment in strategic projects across Europe. As part of the Plan, it was created the European Fund for Strategic Investments (EFSI), a joint European Commission-EIB Group initiative (www.eib.org/efsi/index.htm; www.eif.org/what_we_do/efsi/index.htm) materialised in a guarantee from the EU Budget, for an initial period of three years, to help overcome the current investment gap holding back investment in the EU by mobilising private financing for strategic investments. EFSI was targeted to mobilise at least EUR 315 billion overall in private and public investments across the EU 28 based on an initial amount of EUR 16 billion from the EU budget, complemented by a EUR 5 billion allocation of the EIB’s own capital. Currently, EFSI has two components to support projects with wide sector eligibility:
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the Infrastructure and Innovation Window (EUR 15.5 billion), deployed through the EIB; and
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the SME Window (EUR 5.5 billion), implemented through EIF. The financial instruments used for the purposes of the EFSI SME Window are mainly guarantees and equity investments.
Under the SME window, as per early October 2016, 227 transactions have been signed in 27 countries, covering already around 70% of the total foreseen EFSI SME Window contribution with expected mobilised investments of around EUR 60 billion.
Based on EFSI-supported operations approved as of October 2016, of the total foreseen mobilised investment some 28% is expected to benefit smaller companies.
Latest EFSI figures can be found here (http://ec.europa.eu/priorities/publications/investment-plan-results-so-far_en). Based on the success of the EFSI implementation, the European Commission on 14 September 2016 proposed extending the EFSI by increasing its firepower and duration to cover the period of the current Multiannual Financial Framework as well as reinforcing its strengths.
Looking ahead
As key pillar of the EU architecture supporting growth and employment, the EIB Group will continue:
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To contribute to the economic recovery in the EU. Support for SMEs and Midcaps remains a key priority for the Group. In order to address identified market gaps, and adapting its range of instruments in line with market needs, the EIB and EIF are ready to provide high lending, guarantee, and equity volumes;
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To join forces with the European Commission, public promotional institutions, partner financial intermediaries and public authorities. Particular emphasis will also be put on innovative SME finance models in response to specific market needs. In the context of partnerships with national promotional institutions to support SME financing, there are two new initiatives that exemplify the approach;
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EIF and National Promotional Institutions Securitisation Initiative (ENSI): www.eif.org/what_we_do/guarantees/ENSI/index.htm; and
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the EIF-NPI equity platform: www.eif.org/what_we_do/equity/NPI/index.htm;
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With the back-up of EFSI, to roll-out new financial products and instruments targeting SMEs and Midcaps, with different levels of portfolio granularity. A good example is the launching of new linked and de-linked, funded an non-funded risk sharing finance products by EIB, including also support for supply-chain and other working capital-related financing needs, in cooperation with national promotional banks and commercial financial institutions;
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To promote private sector led growth outside the EU, both by supporting access to finance for SMEs and much-needed economic and social infrastructure and by providing advisory and technical assistance support.
Together, the EIB and EIF will continue to mobilise financial resources and technical expertise to act as a catalyst for SME financing, in order to achieve smart, sustainable and inclusive growth.
The EBRD
The European Bank for Reconstruction and Development (the EBRD) is a multilateral bank committed to the development of market-oriented economies and the promotion of private and entrepreneurial initiative in more than 30 countries from Morocco to Mongolia and from Estonia to Egypt. The Bank is owned by 64 countries, the EU and the EIB.
To respond to the global challenges faced by small businesses, the EBRD, through the Small Business Initiative, blends its own resources with donor funds to deploy an integrated toolbox of activities to increase access to finance and advice for SMEs, including:
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Financing through local financial institutions through the EBRD’s network of over 200 partner financial institutions, including local banks, microfinance institutions, leasing companies and others;
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Co-financing and risk-sharing with partner financial institutions, deploying EBRD’s risk-bearing capabilities to expand lending to SMEs and assist partner financial institutions to better manage their capital and risk;
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Direct financing of individual banking operations by the EBRD, integrated with business advisory support to improve SMEs’ operational performance, including through adoption of higher standards of corporate governance and financial transparency;
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Provision of business advice and know-how to SMEs on a cost-sharing basis through local consultants and international industry advisers, covering areas such as strategy, operations, financial reporting, marketing, energy efficiency and others;
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Targeted policy dialogue coming alongside investments to engage effectively with policy makers and bridge the gap between policy and private sector experience.
The Bank deploys a combination of instruments including debt, equity, mezzanine finance and other forms of risk capital.
In 2016, the EBRD extended EUR 1.24 billion in direct and indirect finance to small firms in 147 transactions, accounting for 39% of its projects. Local currency lending played an important role, representing about a quarter of the debt transactions in the SME sector.
Addressing areas ranging from business strategy to marketing, quality management, export promotion or energy efficiency, in 2016 the Bank drew on the expertise of thousands of local consultants and international advisers to help small firms reach their potential for growth and employment. The EBRD carried out 2 214 projects in 2016 connecting SMEs to local consultants for specific business advice, and 177 projects providing medium-sized firms with the industry expertise of international advisers.
Product innovation
Product innovation plays a key role in the development of the SBI on the ground, drawing on the multi-faceted experience of the EBRD in SME support and ensuring responsiveness to SMEs needs and guided by the principles of i) country-focused support that is appropriate to local circumstances, ii) sustainability consistent with a private-sector focus, maximising the leverage of private capital and iii) impact that is measurable and demonstrable.
Key examples of this approach include:
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The EBRD’s flagship Women in Business programme, promoting women’s entrepreneurship through improved access to finance and advice. To date, the Women in Business programme has been rolled out in 16 countries, making over EUR 500 million of finance and [euro] 64 million of donor funding available to support over 15 000 women-led SMEs. For more information visit the programme website (http://ebrdwomeninbusiness.com);
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Expanded local currency lending through the EBRD’s SME Local Currency Programme, a US$ 500 million programme that aims to develop capital markets and encourage local currency lending in the EBRD’s countries of operations. The programme combines long-term financing available through local banks, supported by a donor-funded first loss risk cover, with availability of business advice for SMEs and reforms and policy support to local authorities. Visit the EBRD website for more information (www.ebrd.com/localcurrency);
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Increasing access of SMEs to capital markets, such as through the SME Growth Market Project with the Zagreb Stock Exchange , aiming to create a regional financing platform for SMEs;
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Working in tandem with local banks to share the risk of financing local companies through the EBRD’s Risk Sharing Facility;
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Supporting trade and regional integration under the Deep and Comprehensive Free Trade Area with the EU in Ukraine, Moldova and Belarus through an integrated programme of support together with the European Union’s EU4Business initiative (www.ebrd.com/news/2015/boosting-smes-access-to-finance-in-the-eastern-partnership-.html).
Looking ahead
Throughout 2017 and looking ahead, the EBRD through the SBI will continue to intensify and deepen support to SMEs, promoting both emerging future leaders within the region and targeting underserved segments within the SME sector, such as women entrepreneurs, displaced entrepreneurs and regional businesses. SBI activities focus on a number of strategic priority areas, including:
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Competitiveness: Insufficient access to finance and know-how poses significant obstacles for SMEs that prevent most of them from growing and becoming more competitive, particularly at the international level. Providing appropriate financing tools and access to business advice helps firms improve their management practices, achieve international standards and stand ahead of their peers;
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Trade promotion: The majority of SMEs in the EBRD’s countries of operations produce mainly for domestic markets. Improving competitiveness on domestic and international levels, as well as developing export readiness, serves to open up new markets for SMEs as well as contributing to economic diversification;
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Inclusive growth: Taking SMEs as a potential driver of economic inclusion, addressing underserved groups within the SME sector is integral to economic development. Creating equality of opportunity for women and youth in business, as well as increasing access for SMEs in regional areas is a key element in a modern, well-functioning market economy and necessary for sustainable growth;
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Corporate governance and standard setting: Promoting adoption of best practices for corporate governance and enhancing transparency and financial management, such as through introduction of IFRS accounting, is an important part of improving long-term SME competitiveness and equipping smaller businesses to make the jump to medium-sized or even bigger levels;
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Business environment: The challenges facing small businesses are complex. By sharing EBRD’s legal and economic experience with policy makers, country-based policy engagements can lower the barriers SMEs face and build sound institutions to support the SME sector in the long term.
← 1. The statistical data for Israel are supplied by and under the responsibility of the relevant Israeli authorities. The use of such data by the OECD is without prejudice to the status of the Golan Heights, East Jerusalem and Israeli settlements in the West Bank under the terms of international law.