SME Banking Knowledge Guide

Fostering a dynamic small and medium enterprise (SME) sector is seen as a priority amongst economic development goals, in both developed and emerging economies. SMEs are a primary driver for job creation and GDP growth. They greatly contribute to economic diversification and social stability and they play an important role in private sector development. SME development also represents a major and difficult challenge. SMEs typically face more severe constraints to growth than large companies, their lack of critical size resulting in reduced access to markets, skills, and capital.

Lack of access to financing is consistently cited by SMEs as one of the main barriers to growth. Often considered by commercial banks and financial institutions as risky and costly to serve, SMEs are largely underserved when it comes to basic financial services. With such limited access to financing, SME owners struggle to make the investments they need to increase productivity and competitiveness of their business, develop new markets, and hire more people.

For more than 50 years, IFC has helped expand access to finance for sustainable private enterprises in developing economies. Leveraging this track record and learning from the experience of banks successful at serving SMEs, IFC has been working with commercial banks to recognize and seize the untapped and profitable opportunity that the SME segment represents. With IFC and others’ help, they are learning how to better understand and cater to SME financial needs, how to better manage SME risk, and how to process smaller transactions at lower cost and with better service quality.

The October 2009 guide supports financial institutions in making informed choices by sharing challenges, opportunities, and effective practices in SME banking operational models from across the globe and through practical examples of SME banking provided by a number of featured financial institutions.

Available in Arabic, English, French, Russian, Spanish and Vietnamese.