Meso Finance - Position Paper
Thierry Sanders (Editor) & Carolien Wegener (Researcher)
meso-finance report
The focus and scope of this paper and the seminar are the financing needs of small and medium
sized entertprises (SMEs) in developing countries.
The focus here is:
- 'Meso Finance' — an unofficial term for financial needs of small businesses ranging between €5,000 and €500,000. That is roughly the financial needs above the microfinance level and below the commercial and subsidized international finance level;
- The size of the SME businesses are anywhere between 2 to 250 employees. Again this is the segment above microfinance (loans to enterprising individuals, sometimes to 'businesses') and below large companies with more than 250 employees;
Summary
The ultimate objective of promoting meso finance in developing countries is to improve small business performance. This in turn will influence higher economic growth and employment, reduce poverty and meet social development objectives. Meso Finance is only one means to these ends.
Access to meso finance requires many ingredients, such as a policy environment conducive to enterprise competitiveness, access to financial and non-financial services, and expanding markets for small business products and services. (1)
SME researchers at IFC, World Bank and others emphasize the crucial importance of SMEs for economic development. SMEs are the source of dynamism for local market development. They create (embryonic) supply chains and employ a majority of the workforce. In countries where markets and government agencies function reasonably well SMEs will represent over 80% of all companies in the economy, they employ over 60% of the workforce. SMEs, formal and informal, form the backbone of the economy.
However, SMEs face many obstacles. In Congo, Dominican Republic, Venezuela and Indonesia it takes at least 100 days to start a business. These starting entrepreneurs are often poorly equipped or trained to start their business. They lack the legal papers to prove their collateral to back their requests for credit.
The central question here is how access to finance can be improved so as to stimulate SME growth. This growth will generate the jobs, income, self-esteem and entrepreneurial dynamism needed for economic growth and poverty reduction.
This is our challenge!
(1) Committee of Donor Agencies for Small Enterprise Development — ‘Business Development Services for small
enterprises’ — 2001 — SME Dept. World Bank.
