2005 Milken “Capital Access Index”

The Milken Institute has just published its 2005 Capital Access Index

entitled”Best Markets for Entrepreneurial Finance.” This index ranks 121countries by how easily new and existing firms can access capital.

As PSD blogger Pablo Halykard points out,17 of the lowest-ranking 20 countries are in Africa, which is thelowest scoring region of the world. Interestingly, the Middle Eastscores higher than Europe–but this is skewed by countries like SaudiArabia, whose oil revenues are so high they do not have income tax, andtherefore retain more capital.

So what? Well, first, this helpsquantify the impact of microloans: the Milken Institute considersmicrofinance a component of the 7 variables it uses to calculate aneconomy’s business climate. (Even if the Index does give too much weight to external financing.) Second, the Milken CAI Index is reprinted in international news and major publications.For the Index to credit (ha) entrepreneurialism and a faster “pace ofinnovation” to loans the size of $500 increases the credibility ofmicrofinance. The Index even cites the date of the first MFI inBangladesh on its “securitization timeline.”

Note that the Milken Index is different from the World Bank’s 2006 “DoingBusiness” Index,which ranks 150 countries according to 10 topics. (One of the 10 is”getting credit,” by which Botswana scores 4th highest–the UnitedStates is 15th. However, I can’t find any mention of microcredit in theWorld Bank’s Doing Business methodology. )

Aninteresting side topic to the importance of microloans on economies isthe lack of “meso-loans,” or loans between $50,000 and $500,000. Theseare critical to enabling SMEs to scale. See a previous discussion onNextbillion here.

Forthe wonkish and/or curious, the seven variables on which the MilkenCapital Access Index is calculated are: Macroeconomic Environment,Institutional Environment, Financial and Banking Institutions (i.e. access to credit), Equity Market Development, Bond Market Development, Alternative Sources of Capital and International Access.