Small and Medium Enterprises (SMEs) play a major role in most economies, particularly in developing countries.  Formal SMEs contribute up to 60% of total employment and up to 40% of national income (GDP) in emerging economies. These numbers are significantly higher when informal SMEs are included.  According to our estimates, 600 million jobs will be needed in the next 15 years to absorb the growing global workforce, mainly in Asia and Sub-Saharan Africa. In emerging markets, most formal jobs are generated by SMEs, which also create 4 out of 5 new positions. However, access to finance is a key constraint to SME growth. Without access to capital, many SMEs languish and stagnate. 

SMEs are less likely to be able to obtain bank loans than large firms; instead, they rely on internal funds, or cash from friends and family, to launch and initially run their enterprises. About half of formal SMEs don’t have access to formal credit. The financing gap is even larger when micro and informal enterprises are taken into account.  Overall, approximately 70% of all micro, small and medium-sized enterprises (MSMEs) in emerging markets lack access to credit.  While the gap varies considerably region to region, it’s particularly wide in Africa and Asia. The current credit gap for formal SMEs is estimated to be US$1.2 trillion; the total credit gap for both formal and informal SMEs is as high as US$2.6 trillion.

A World Bank Group study suggests there are between 365-445 million MSMEs in emerging markets: 25-30 million are formal SMEs; 55-70 million are formal micro enterprises; and 285-345 million are informal enterprises.  Moving informal SMEs into the formal sector can have considerable advantages for the SME (for example, better access to credit and government services) and to the overall economy (for example, higher tax revenues, better regulation). Also, improving SMEs’ access to finance and finding solutions to unlock sources of capital is crucial to enable this potentially dynamic sector to grow and provide jobs. 

What We Do

A key area of the World Bank Group’s work is to improve SMEs’ access to finance and find innovative solutions to unlock sources of capital.

Our approach is holistic, combining advisory and lending services to clients to increase the contribution that SMEs can make to the economy.

Advisory Support for Financial Sector Infrastructure:

  • Credit Reporting Systems are important as better credit information can lead to increased credit for SMEs. 
  • Secured Transaction Registries ensure that SMEs can provide moveable collateral as the basis for more lending. 
  • Modernized Insolvency Regimes can help restructure viable businesses while also promoting the efficient and effective “exit” of those firms that are not economically efficient.
  • Streamlining of Payments Systems supports the more efficient movement of money throughout the economy, including G2B, B2B, remittances and other payments.

The World Bank can help establish the legal and institutional framework for strong financial infrastructure systems.

Lending Operations and Policy Work:

  • SME Lines of Credit provide dedicated bank financing – frequently for longer tenors than are generally available in the market – to support SMEs for investment, growth, export and diversification.
  • Partial Credit Guarantee Schemes (PCGs) – the design of PCGs is crucial to SMEs’ success, and support can be provided to design and capitalize such facilities.
  • Early Stage Innovation Finance provides equity and debt/quasi-debt to start up or high growth firms which may otherwise not be able to access bank financing.
  • Policy work, analytical work, and other Advisory Services can also be provided in support of SME finance activities.

The WBG is increasingly looking to develop more innovative forms of SME financing, including: an extension of early stage innovation financing delivery mechanisms; franchising models; digital finance solutions; crowd funding; P2P financing;  and Big Data Solutions.


A few examples of our work in the SME Finance space:

Lines of Credit: 

  • In 2011 post the revolutions, countries in the Middle East and Africa region requested funding for SMEs to support private-sector growth and job creation. Around one billion dollars have subsequently been lent to Egypt, Tunisia, Morocco, Jordan and Lebanon. This has helped restore private-sector funding in economies where severe budgetary strains have crowded out the private sector – particularly the ore marginal SME sector. It is estimated that these loans have directly created around 150,000 jobs over the past four years.

Secured Transactions Reforms:

  • Between October 2007 and June 2011 the secured transactions reform work supported by the World Bank Group in China cumulatively facilitated US$3.58 trillion accounts-receivable financing, of which US$1.09 trillion went to SMEs. As a result of the reform, the total number of commercial loans involving movable assets grew by 21% per year from 2008 to 2010, compared to zero from 2006 to 2008.
  • In Colombia, in less than one year more than 100,000 loans secured with movable assets have been registered in the movable collateral registry, of which 5,000 were for SMEs -- for an aggregate amount of US$3.43 billion (compared to a few hundred per year before the reform).
  • Liberia started a collateral registry in 2014 to securitize movable assets, making it possible for farmers and entrepreneurs to use such assets against which they could borrow money.  In less than a year since its launch – most of which was during the Ebola crisis – US$227 million in loans were registered.
  • In Afghanistan, the recent establishment of the Public Credit Registry to determine the credit performance of borrowers has significantly improved access to financing of small and medium enterprises.

Who We Work With

Leveraging our expert knowledge, we work globally in partnership with other multilateral and bilateral development organizations to support SME Finance development in emerging markets.