06 November 2013

Financing the SME Value Chains

Asia’s economic miracle is often associated with large, multi-national companies. While these organizations have been important drivers of the region’s growth, small and medium enterprises (SMEs) accounting for more than 98% of the enterprises have played a key role. These SMEs contribute around 40% to their country’s GDP in the ASEAN region. In developed nations such as the USA, UK, France and Singapore, SMEs contribute more than half of their country’s GDP.

Addressing SMEs’ needs for finance, it is assessed that formal financial lending organizations represent a weak link in the financial supply chain for SMEs in the region. The problem also hinders the physical supply chain in that SME’s are key drivers of business growth in the region. This paper proposes a framework for financial lending to allow formal lending organizations to compete with the alternate sources of finance SMEs seek.

This research work is built upon case studies from Malaysia and India, and surveys conducted on the supply and demand of SME finance in Malaysia. A lack of collateral and limited access to venture and growth capital are some of the obstacles that SME owners face when seeking finance for their businesses. Cash flow shortages caused by long or delayed payment cycles exacerbate the problem. On the supply side, a number of issues including high transactions costs, inadequate information about borrowers and weak governance, deter large banks from developing SME lending portfolios. In the absence of bank lending options
many SMEs turn to other sources of finance such as unregistered money lenders that charge high interest rates. It is realized that the local money lenders are accessible and understand the SME business model better. They are also able to keep a tight rein on costs and have developed ways to make sure that investment funds are used by borrowers for profit-making purposes.

by Asad Ata, Manish Shukla, Mahender Singh

Download (6.95MB)

Call for Proposals

Current call for proposal submission window is closed. Stay tuned as another opportunity will be posted soon.

Annual Report 2017

The SWIFT Institute Annual Report 2017 is now available.

Download

FAQ

The SWIFT Institute issues calls for research proposals on specific themes or topics on an on-going basis. Submissions are reviewed by the Advisory Council, and grants are awarded to support approved research proposals.
Proposals from prospective researchers must include a cover letter, CV, details of research experience, examples of published work, references, idea for research, methodology to be used, timeframe for completion, and expected output (e.g. working paper, presentation). Proposals should only be submitted in response to an issued Call for Proposal.
Once a sponsored research paper is ready to be published, the SWIFT Institute will publish it on its website as well as the academic journal repository SSRN. The SWIFT Institute will issue a press release on the paper and may even feature the newly published research in its quarterly newsletter. After the SWIFT Institute publishes the research, the research and its content belong to the researcher to publish, giving credit to the support given by the SWIFT Institute.

Submit your paper

If you have a paper that is of relevance to the financial industry and you would like it to be considered for publication on the SWIFT Institute website, please send us your request by using our Contact Form.

Contact Us