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SME Banking


Small and medium enterprises (SMEs) are critical for the economic and social development of emerging markets. They play a major role in creating jobs and generating income for low income people; they foster economic growth, social stability, and contribute to the development of a dynamic private sector. As such, access to financial services is vital in developing a vibrant SME sector in any economy. In many emerging markets, however, access to financial services for SMEs remains severely constrained.


Over the past decade, IFC has played a critical role in helping small and medium enterprises worldwide gain greater access to financing.IFC works to increase access of SMEs to financial services in developing countries by providing funding for equity, loans, and mezzanine finance to financial intermediaries focusing on SME financing, and by building capacity of financial intermediaries and raising awareness on best SME Banking practices. IFC uses both investments and technical assistance to support financial intermediaries outreach to the SME sector more effectively and efficiently. Investments made by IFC in financial intermediaries focusing on SME lending have included equity investments, loans, revolving credit lines, and risk mitigation facilities. On the advisory side, IFC supports enhance banks SME operations in areas such as strategy, market segmentation, product development, risk management and IT/ MIS. facilities.


In FY14, IFC’s Global SME Banking Advisory Services Program comprised 95 projects spanning 52 countries and totaling $96 million. About 62 percent of these projects were focusing on International Development Association (IDA) countries, with 18 percent in conflict-affected or fragile states. Almost 36 percent of the projects included a component supporting targeted lending to women-owned SMEs.


Activities undertaken by the program under the G-20 initiative helped cement IFC’s position as a global thought leader in the SME finance area. As the technical lead for the G-20 SME Finance Sub-Group under the Global Partnership for Financial Inclusion (GPFI), IFC’s program led the production of a stocktaking report which included a literature review on SME finance challenges, the collection of more than 160 SME finance models, and policy recommendations to scale up SME access to finance.


IFC’s Financial Institutions Group supports a series of initiatives aimed at helping individuals and households access formal financial services, including the SME Finance Challenge, a competition launched by the G-20 to identify models that enable access to finance for SMEs. IFC established a fund for winners of the challenge and has contributed to the fund. At 2011 Cannes summit, the G-20 leadership lauded IFC’s role in setting up the fund, which mobilizes grant and risk capital for winning proposals from the Challenge and for scaling up successful SME financing models.

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