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Enhancing SME Growth in the Mediterranean: Financing Tools and Opportunities

Explore the challenges facing SME financing in the Mediterranean region and discover the potential for growth through the implementation of innovative financing tools and partnerships. This article highlights the importance of SMEs in the economy and provides insights into the obstacles they face in accessing funding.

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Enhancing SME Growth in the Mediterranean: Financing Tools and Opportunities

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  1. The Point of View of Small and Medium EnterprisesJosep Mª Cervera CasanovasInternational DevelopmentBarcelona Chamber of Commerce and Industry

  2. Barcelona Chamber of Commerce and Industry . Leading euromediterranean chamber . Achieving global positioning thru networking . Representing more than 350.000 SME . General secretariat fof ASCAME (mediterranean Chambers association)

  3. SME’s In the MED Region • 80-85% of the total number of enterprises • 60-65% of the economic structure • 55-60% of the GDP • 50-55% of the Business Environmental problems • Family structure • 100000 Euros is the average of yearly Working Capital

  4. SME’s In the MED Region . Mediterranean growth will drive EU SME future mainly by its strategic positioning (30% maritime traffic, 25%hdrc) . Significant level of investments in Med region (3%W.ide) . SMEs, backbone of the economy in developing countries But very limited funds accessible to SMEs .Private Credit to GDP averages 18% in Africa (27% in South Asia and 109% in developed countries) .IFC finance typically goes to large-sized companies

  5. SME’s are underserved by the finance and investment arena, thus representing a significant opportunity The development of SMEs market in the mediterranean countries is considered to be one of the most crucial components of the government's social and economic development agenda. The ASCAME is exerting many efforts to develop the SME sector and boost its contribution towards the economy. Background on the SME landscape in MED region The middle market , when compared to other developed economies, represents a limited component of the overall economy and thus represents significant potential for growth Lack of a robust and dynamic medium enterprise sector similar to those that have emerged in East Asia has resulted in what has come to be known as "the missing middle" syndrome. The lack of such an important and vibrant sector has resulted in weak linkages between the large-scale and SME sectors, and dependence on imports to fulfill the requirements of large corporations New financing tools can play an integral role in promoting this sector of the economy, thereby leading to an increasing contribution to GDP SME contribution to manufacturing sector employment in select countries | % Source: MOF, Egypt 2006

  6. Future Value building requires: • The introduction of incentives and new financing mechanisms dedicated to SME’s to change consumption and production patterns, • The development of research, training centers and SME’s networking-at the regional level in order to promote the development and transfer of environment friendly technologies, • The implementation of strategic finance roadmaps at the national levels and synchronized at the regional level –in the key business sectors and sub sectors.

  7. Obstacles Facing Financing sustainable development by SME’s • High Interest rates • Tax reforms and reforms of financial and banking systems, taking into account needs related to sustainable development if on process are still very slow. • Moreover, in many countries, the collateral required by commercial banks and the high costs of credit impede access by SMEs to investment in productive activities which correspond to environmental standards. • Most credit lines are for big enterprises 1M and above

  8. Financing sustainable development by SME’s • There is an urgent need for the implementation of Euro-Mediterranean financing tools, such as: • micro-credit, • soft loans, • venture capital • Explore Euro-Mediterranean fund for SME’s

  9. BARRIERS PERCIEVED LENDING TO SMEs . Small amounts which require large amounts of time/effort . Cumbersome administrative procedures . Lack of understanding of SME needs . Inability to assess credit worthiness Poor financial information Unreliable accounting High transaction costs

  10. FINANCIAL TOOLS • . Credit scoring • . Introducing and accepting forfaiting • . IT for loan applications/credit analysis/virtual banking • . Delegating approvals to bank local staff • . Segmentation of customers • . External business appraisals • . Public-private Partnerships Lowering Transaction Costs

  11. CHAMBERS AS BUSINESS DEVELOPMENT SERVICE PROVIDERS . Identify potential clients for the bank . Help assessing credit worthiness . Assist installing adequate accounting systems . Pre-screen project proposals . Monitor repayment . Arbitration (CCI) . Maintain one-to-one contacts

  12. Working with SMEs in the Mediterranean region is a Big opportunity You are working with a Future Big Client

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