Small and medium enterprises to help them become competitive enterprises is the key to sustainable growth in Asia as the world recovers from the global economic downturn, a new report from the Asian Development Bank (ADB) said.
“Asia has millions of SMEs, but few of them are able to develop to the point where they can innovate or be part of the global supply chain. To do this, they need more capital for growth and opportunities for access to various financing channels, “said Noritaka Akamatsu, senior advisor in the sustainable development of the Asian Development Bank and climate change, which produced the report.
Asia Monitor 2014 SME financing, which assesses 20 developing countries in Asia, said that SMEs are an average of 96 percent of all registered enterprises and employ 62 percent of the workforce. However, they only contribute 42 percent of economic output.
Regional integration and trade liberalization, companies must go to be focused on countries to be targeted more broadly. This also offers opportunities for small companies to explore overseas markets, while exposing companies to more competition, said ADB.
Read also : Myanmar Exports
The Manila-based lender said that governments in the region should help SMEs to become more competitive and able to participate in global value chains. This includes governments facilitating SME access to new funding, such as funding the supply chain.
Limited access to bank credit is a persistent problem in Asia and the Pacific. According to the ADB loan for SMEs, it decreased during the global financial crisis and, in 2014, he received only 18.7 percent of total bank loans.
However, several countries have made progress on this front ,. Papua New Guinea and the Solomon Islands have made it easier for companies to borrow using moveable assets as mandatory quotas guaranteeing bank loans, Indonesia and the Philippines have introduced SMEs, Kazakhstan and Mongolia Plans and encouraged refinancing the loan.
Yet the region needs to further develop credit bureaus, collateral registries and credit guarantees to increase the financial reach, especially in low-income countries, the report said.
The non-banking financial sector – which usually includes finance companies, factoring companies and leasing, for example – in Asia and the Pacific is still too small to meet the financing needs of SMEs, with only a tenth loans of total outstanding bank loans in the region.
ADB said governments should put in place a comprehensive policy framework to assist non-bank financial institutions to expand their options for SME financing. Ongoing efforts to open the capital markets to SMEs will also help SMEs to provide long-term financing they need to grow, he said.
Read also : Pottery in Myanmar