It's all about the money

It's all about the money

When former WTO Director General Pascal Lamy asked CBI to quantify SMEs’ difficulty in gaining access to finance, and the effect of the financial crisis, CBI conducted a study that looked at the issue first-hand, from SMEs’ perspective.

Drop in turnover

CBI commissioned Panteia/EIM, an agency experienced in this field, to conduct online surveys among SME exporters and Business Support Organisations (BSOs), as well as interview financial experts with a broader perspective. CBI’s programme manager for market intelligence Bram van Helvoirt, who coordinated the work, explains what makes the study special: “It’s very hard to get direct information from SMEs, but we received almost 600 questionnaires back from the firms we approached. More than two-thirds said their turnover has dropped by an average of 31 per cent.”

It's all about the money

The crisis and fall in turnover has made it harder for SMEs to finance their activities: 42 per cent of firms cited a lack of funds as a major obstacle to exporting. African SMEs, particularly smaller ones in the agricultural sector are hardest hit. “Agricultural crops are less predictable than industrial products so banks, which are now more risk-averse anyway, are wary of lending to agricultural producers.”

Risk assessments

In many countries banks must now comply with stricter government regulations and it’s often hard for them to establish SMEs’ creditworthiness. “Smaller firms can lack effective financial management and don’t know how to give banks what they need to make risk assessments, so banks refuse them loans. Furthermore, many European importers struggling with cash-flow problems are extending their payment terms, thereby shifting the financial risk to suppliers.”

It's all about the money

Survey respondents complained of being puzzled by complicated trade financing instruments and many cried out for more information and tools to help them use trade financing. Van Helvoirt sees a role here for local BSOs who can act as intermediaries between SMEs and banks. “They have a lot of relevant information and they understand the local dynamics. With the proper skills, they can also provide coaching.”

CBI is currently running a pilot project in Central America that will provide training to SMEs while building local institutional capacity. “My CBI colleagues there are organising workshops in several Central American countries in which SMEs are learning about financial markets and banks, as well as pooling knowledge and experience.

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