EXPERTS ADOPT PRINCIPLES OF GOOD PRACTICE FOR SUSTAINABLE DEVELOPMENT OF SMALL AND MEDIUM-SIZED ENTERPRISES
Press Release
TAD/1878
EXPERTS ADOPT PRINCIPLES OF GOOD PRACTICE FOR SUSTAINABLE DEVELOPMENT OF SMALL AND MEDIUM-SIZED ENTERPRISES
19990611 (Reissued as received.)GENEVA, 7 June (UNCTAD) -- Some 70 experts from around the world on small and medium-sized enterprises (SMEs) agreed last week on a set of recommendations and principles of good practice for action to enhance SME access to financial and business development services.
Their recommendations are based on the recognition that, without access to finance and business development services, SMEs will not be able to start up, grow or engage in continuous innovation -- a necessary skill to compete in the national and global economy. Efficient business development services can help SMEs solve problems of access to markets, technology and business skills.
According to the experts, "the provision of financial services must be closely linked to the delivery of business development services which can improve both the viability of SMEs and their ability to repay loans as well as reduce the transaction costs of providing such loans".
Governments and the international community are called upon to adapt to the local context principles of good practice when promoting the delivery of business development services. The latter should be "demand-driven and provided in a decentralized manner when possible by those who can relate closely to the client's needs, and be designed specifically for the target groups and the local context".
Business development services and finance would enable SMEs to fulfil their potential contribution to the generation and distribution of income, job creation, poverty alleviation, community development and the efficient integration of developing countries into the global economy.
Recognizing that financial institutions sometimes find it difficult to serve SMEs in developing countries, because of high risk and high transaction costs, the experts call upon governments and the international community to "consider introducing flexibility in adjusting the regulatory requirements where necessary to allow banks to better service SMEs". Practices, such as group lending, and mechanisms such as peer pressure, linking savings with credit, and the possibility of continued credit would help.
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According to the experts, credit guarantee schemes, credit rating systems and credit scoring systems could reduce the transaction costs involved and leasing could lessen the demands for capital outlays for SMEs. "Where capital markets permit, the possibility of securitization of SME loan portfolios should be explored, which would have the benefit of increasing the volume of funds available for further SME lending."
One problem is the absence of standardized tools to permit the assessment of SMEs' performance by banks and equity markets. In this regard, the experts highlighted the United Nations Conference on Trade and Development's (UNCTAD) work on recommendations for an accounting system which will allow SMEs to produce transparent, reliable and standardized financial and business information.
They suggested that UNCTAD also identify and test ways of linking credit, leasing, equity and venture capital funds with creditworthy SMEs which have been through a pre-screening and capacity-building system such as EMPRETEC (an UNCTAD programme which promotes the creation and growth of SMEs through a business support network) or which have been identified by microfinance institutions.
For more information, please contact Lorraine Ruffing, Head, Enterprise Development Branch, Division on Investment, Technology and Enterprise Development, UNCTAD, telephone: +41 22 907 5802; fax: +41 22 917 0197; or e-mail: lorraine.ruffing@unctad.org; or Carine Richard-Van Maele, Chief, Press Unit, UNCTAD, telephone: +41 22 907 5816/28, fax: +41 22 907 0043; or e-mail: press@unctad.org
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