Developing Financial Structures to Foster Enterprise Development

This paper argues that strategies for stimulating business enterprise finance should revolve around:

• Establishing effective bank regulation and supervision;
• Setting an appropriate positive real interest rate;
• Reducing unnecessary government intervention, guidance, and direction;
• Addressing the credit rationing and financial exclusion and other problems, such as inadequate competition in banking, that arise from market failures.

The paper further discusses issues such as:

• Role of the financial sector in promoting the growth of enterprises;
• Financial system restructuring, as a means of correcting broad policy-induced distortions;
• Financing of SMEs and the role of development banks;
• Possibility of utilizing venture capital;
• Prospects for developing capital markets.

The paper concludes that Banks will continue to play a leading role in promoting the growth of enterprises, especially the SMEs, although over time stock markets will become increasingly important in most developing and transition economies.