How and Why We Finance SMEs

There are several constraints holding small and medium enterprises (SMEs) back, and access to finance is one of their most pressing problems. If development finance institutions can help to solve that problem, the development consequences will be enormous.

This paper tells the story of BII’s efforts to close the SME financing gap, tries to explain why the gap exists, and examines what the evidence has to say about the development impact of improving access to finance for SMEs. The paper looks primarily at Africa, although BII's experience in South Asia also offers some lessons for how the African market might develop. It also focuses on access to finance that enables SMEs to invest and grow.