Small Businesses in Emerging Markets Need Alternative Financing Options
By Andrés Abumohor
Small and medium-sized enterprises (SMEs) contribute substantially to the global economy. They now make up 90% of businesses and 50% of employment worldwide. In emerging markets, SMEs are propelling development by introducing new products, processes, and competition. Although it is difficult to gather and track data about informal companies in emerging economies, SMEs that are registered add as much as 40% to national income (GDP) and provide 80% of the jobs.
Despite their valuable contributions to the global economy and emerging markets, young companies are facing many challenges. The current COVID-19 pandemic is only fueling one of the primary difficulties for SMEs – a lack of access to credit. Nearly 70% of small companies already lack access to credit, which has created a finance gap of $5 trillion in emerging markets, compared to the $4.2 trillion in lending.
Photo courtesy of Mission de l’ONU au Mali.