SME Finance

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Workers at a Factory in Ghana

A worker rolling a spool of cable across the factory floor at Reroy Cables, an IFC beneficiary in Tema, Ghana. © Nyani Quarmyne, Panos/IFC

Small and medium enterprises (SMEs) are critical for the economic and social development of emerging markets. These businesses generate income and create the majority of jobs—between 70 and 95 percent of new employment opportunities—in emerging economies. SMEs are more likely to generate jobs, and at a faster pace, when they have access to finance.

Yet access to financial services for SMEs remains severely constrained in many developing countries, restricting business growth. Owners and entrepreneurs report access to capital to be one of their toughest challenges, one that sometimes outranks electricity shortages and other concerns. As estimated by IFC’s MSME Gap Assessment report, the global gap in such funding is $5.2 trillion.

We use investment and advisory services to support financial intermediaries in reaching out to the SME sector more effectively and efficiently. On the investment side, IFC helps to increase businesses’ access to financial services by providing funding for equity, loans, and mezzanine finance to institutions that focus on SME lending.

As an example of our investment and advisory services for SMEs, IFC created the Global SME Finance Facility in partnership with the United Kingdom and Dutch governments. This facility strengthens financial institutions' abilities to address the needs of SMEs in emerging markets. Since 2012, the facility has funded about 100 projects. Projects ease access to finance for SMEs in some of the most challenging markets.

 

SME Finance: Results

  • Potential for job-creation: SMEs account for more than 80 percent of net job origination in developing countries.
     
  • Need for SME Finance: 40 percent of MSMEs in 128 countries are credit-constrained.
     
  • Impact of IFC's SME investment funds in 2017: $351.1 billion; 8.3 million SMEs reached. IFC Annual Report 2017
     
  • Experience of IFC: More than 30 years of financing SMEs through the private sector.
     

 

Examples of our work:


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