SME finance is benefiting from policy incentives in emerging markets, with capital inflows up 4.2% in Q Davison highlighted a key finding from the report: around 250,000 SMEs have sought bank loans or private lending over the past three years, according to a British Business Bank survey. Many of these businesses encountered requests for personal guarantees, causing some to abandon their loan applications. In some countries, policymakers should consider regulations to support direct access of SMEs to capital markets, particularly medium-sized companies, for both equity and debt, as well as frameworks for specialized instruments, like credit funds and SME securitization. Policymakers should also implement laws and regulations to support the expansion of digital intermediaries, such as crowdfunding platforms, in line with recent developments in many HICs and EMDEs. Additionally, governments should build supportive financial infrastructures, including credit reporting systems, secured transaction frameworks and collateral registries, specialized SME insolvency regimes, and critical digital public infrastructure. Authorities should also consider mechanisms to foster competition and innovation, such as implementing open finance. In tandem, policy makers should assess the need for reforms to the regulations of institutional investors to allow them to invest in SME related assets. Broker surveys suggest SME finance dividend yields will average 2.1% this year, appealing to income-oriented investors amid stable credit conditions.
