Lack of credit facilities for small and medium enterprises


Despite their vast numbers, Small and Medium Enterprises (SMEs), have traditionally had difficulty in accessing formal credit, particularly long-term finance. The key reasons for this are well known: SMEs are considered high-risk undertakings due to their insufficient assets and low capitalization, vulnerability to market conditions and high failure rates; in many countries, banks are biased in favour of large corporate borrowers or public-sector entities; information asymmetry arising from SMEs' lack of accounting records and other financial documentation makes it difficult for banks to assess the creditworthiness of potential SME borrowers; and the high administrative costs of lending small amounts generally do not make SME lending a profitable business for banks.

Broader Problems:
Limited availability of loans
Related UN Sustainable Development Goals:
GOAL 9: Industry, Innovation and InfrastructureGOAL 17: Partnerships to achieve the Goal
Problem Type:
E: Emanations of other problems
Date of last update
04.10.2020 – 22:48 CEST