Capacity Building in Trade Institutions of Central Asian Countries

Istanbul, 3rd – 5th February 2015

102.05.2023

Access to Finance for SMEsChallenge and Chance for Policymakers

Daniel Stanislaus MartelPrivate Sector Development and SME Development Policy Advisor

Ministry of Commerce and Industries (MoCI) of the Islamic Republic of AfghanistanPrivate Sector Development Directorate General

The Standing Committee for Economic and Commercial Cooperation of the Organization of

the Islamic Conference (COMCEC)

02.05.2023 2

Capacity Building in Trade Institutions of Central Asian Countries of COMCECIstanbul, 3rd – 5th February 2015

Access to Finance for Micro-Enterprises and SMEs

Salaam Alaykom and Welcome

How to facilitate Access to Finance for SMEs?Basics and Baselines

Current Situation in Emerging Countries

Roles for Policymakers

Expected Objectives and Outcomes

Targeted ImpactsDr. Daniel Stanislaus Martel

CTAP Advisor

02.05.2023 3

Capacity Building in Trade Institutions of Central Asian Countries of COMCECIstanbul, 3rd – 5th February 2015

Access to Finance for Micro-Enterprises and SMEs

Learning Objectives

After our training, you will be able to… … explain at least three priorities for entrepreneurs

… explain at least three priorities for financers

… explain at least three objectives for Policymakers

Dr. Daniel Stanislaus MartelCTAP Advisor

02.05.2023 4

Capacity Building in Trade Institutions of Central Asian Countries of COMCECIstanbul, 3rd – 5th February 2015

Access to Finance for Micro-Enterprises and SMEs

Our Workshop

Dr. Daniel Stanislaus MartelCTAP Advisor

Source: Elaborated by Author based on

Basics and Baselines of SMEs and Finance

Attempted Impacts of Policies

Expected Objectives and Outcomes

Current Situation in Emerging Countries

What can Policy-Makers Improve

Skills

Know

ledg

e

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Capacity Building in Trade Institutions of Central Asian Countries of COMCECIstanbul, 3rd – 5th February 2015

Access to Finance for Micro-Enterprises and SMEs

Basics and Baselines

DefinitionsWhat are Micro- and Small- & Medium-Sized

Enterprises (SMEs)?

What are financial needs for Micro-Es and SMEs?

How are Micro-Es and SMEs financed?

Dr. Daniel Stanislaus MartelCTAP Advisor

02.05.2023 6

Capacity Building in Trade Institutions of Central Asian Countries of COMCECIstanbul, 3rd – 5th February 2015

Access to Finance for Micro-Enterprises and SMEs

Bases and Baselines: Ways of Financing

Dr. Daniel Stanislaus MartelCTAP Advisor

Source: Elaborated by Author based on Stein (2010), p.7, and Stein, Goland and Schiff (2010), p.8Smaller enterprise

Informal

Larger enterprise

Shor

t ter

mM

ediu

m te

rmLo

ng te

rm

Avai

labl

e Fi

nanc

ial O

ption

s

Formal Growing Established

MicrofinanceTrade Finance

Leasing

Private Equity

Bank-assu

red SME Fin

ancing

Capi

tal

Mar

kets

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Capacity Building in Trade Institutions of Central Asian Countries of COMCECIstanbul, 3rd – 5th February 2015

Access to Finance for Micro-Enterprises and SMEs

Bases and Baselines: How Finance Works

Dr. Daniel Stanislaus MartelCTAP Advisor

Source: Elaborated by Author based on Stein (2010), p.11

0.1 %

0.9 %

5 – 10 %

20 %

65 – 75 %

Corporate & Multinationals

Large Enterprises

Medium Enterprises

Small Enterprises

Micro-Enterprises

Urge

ncy o

f fina

ncin

g for

surv

ival

Info

rmal Mic

rofin

ance

Cap.

Mrt

.

Priv

ate

Equi

ty

?

Availability of financers to support

SME Finance Gap

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Capacity Building in Trade Institutions of Central Asian Countries of COMCECIstanbul, 3rd – 5th February 2015

Access to Finance for Micro-Enterprises and SMEs

Current Situation in Emerging Countries

ExpectationsObjectives of Micro-Es and SMEs

Dilemmas for finance providers

Public Opinion complicating everything

Dr. Daniel Stanislaus MartelCTAP Advisor

02.05.2023 9

Capacity Building in Trade Institutions of Central Asian Countries of COMCECIstanbul, 3rd – 5th February 2015

Access to Finance for Micro-Enterprises and SMEs

Current Situation in Emerging Countries

Dilemmas for financial providersBusiness friendly climate: ending obstacles

Attracting investment: improving perspectives

Promoting exports: finding niches

Encouraging industrialization: obtaining rewardDr. Daniel Stanislaus Martel

CTAP Advisor

02.05.2023 10

Capacity Building in Trade Institutions of Central Asian Countries of COMCECIstanbul, 3rd – 5th February 2015

Access to Finance for Micro-Enterprises and SMEs

Current Situation – Public Opinion

Dr. Daniel Stanislaus MartelCTAP Advisor

Source: Elaborated by Author based on Stein (2010),

Micro-EnterprisesSMEs

Financial Institutions

Policymakers of the government

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Capacity Building in Trade Institutions of Central Asian Countries of COMCECIstanbul, 3rd – 5th February 2015

Access to Finance for Micro-Enterprises and SMEs

Roles for Policymakers

DefinitionsWhat shall we achieve?

Why should we succeed?

How should we act?

Dr. Daniel Stanislaus MartelCTAP Advisor

02.05.2023 12

Capacity Building in Trade Institutions of Central Asian Countries of COMCECIstanbul, 3rd – 5th February 2015

Access to Finance for Micro-Enterprises and SMEs

Roles for Policymakers – Why Succeed?

Dr. Daniel Stanislaus MartelCTAP Advisor

Source: Elaborated by Author

Micro-EnterprisesSMEs

Financial Institutions

Survive, Optimize

Grow, Expand

Minimize Risks

Grow, Expand

Busi

ness

Re

latio

nshi

p

Mut

ual

mist

rust

Gulf

Is w

ide ? Policymaker!

What do you do?

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Capacity Building in Trade Institutions of Central Asian Countries of COMCECIstanbul, 3rd – 5th February 2015

Access to Finance for Micro-Enterprises and SMEs

Roles for Policymakers – How should we act?

Dr. Daniel Stanislaus MartelCTAP Advisor

Source: Elaborated by Author based on

Enabling

Facilitating

RegulatingCoordinating

Optimizing

Expe

cted

O

utco

mes

Objectives

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Capacity Building in Trade Institutions of Central Asian Countries of COMCECIstanbul, 3rd – 5th February 2015

Access to Finance for Micro-Enterprises and SMEs

Roles for Policymakers

How? Making life for financial entrepreneurs easierEasier banking operations

National enterprise/collateral information system

Credit Guarantee Scheme

Credit/Loan Facility or FundDr. Daniel Stanislaus Martel

CTAP Advisor

02.05.2023 15

Capacity Building in Trade Institutions of Central Asian Countries of COMCECIstanbul, 3rd – 5th February 2015

Access to Finance for Micro-Enterprises and SMEs

Roles for Policymakers – Credit Guarantee Scheme

Dr. Daniel Stanislaus MartelCTAP Advisor

Source: Elaborated by Author based on Somma (2013), p.25-28

Micro-Enterp.SME

Bank or Lender

Credit Guarantee

Scheme

Legislation-governedAgreement/Contract

Credit or Financial Facility

Pays back amount plus interests

Approves Agreement/Contract

Pays back In case of failure

National or International Back-Up

02.05.2023 16

Capacity Building in Trade Institutions of Central Asian Countries of COMCECIstanbul, 3rd – 5th February 2015

Access to Finance for Micro-Enterprises and SMEs

Roles for Policymakers – Credit/Loan Facility

Dr. Daniel Stanislaus MartelCTAP Advisor

Source: Elaborated by Author based on Martel (2013) and USAID and Faida (2013 a, b)

Credit/Loan Facility

National or International Back-Up

Micro-Enterp.SME

ParticipatingBank

Policy/ToR-governedAgreement/Contract

Service provisionAgreement/Contract

Money madeavailable

Credit or financialfacility

Pays back amount and interests

Pays commission for services

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Capacity Building in Trade Institutions of Central Asian Countries of COMCECIstanbul, 3rd – 5th February 2015

Access to Finance for Micro-Enterprises and SMEs

Expected Objectives and Outcomes

From Action to VisionContinue current successful action

Listen to Micro-Es/SMEs and financial providers

Learning from experience elsewhere

Innovate and encourage innovationDr. Daniel Stanislaus Martel

CTAP Advisor

02.05.2023 18

Capacity Building in Trade Institutions of Central Asian Countries of COMCECIstanbul, 3rd – 5th February 2015

Access to Finance for Micro-Enterprises and SMEs

Targeted Impacts

Plausible PerspectivesFor the Micro-Es and SMEs

For the Financial Service Providers

For the National Economy

For Your RegionDr. Daniel Stanislaus Martel

CTAP Advisor

02.05.2023 19

Capacity Building in Trade Institutions of Central Asian Countries of COMCECIstanbul, 3rd – 5th February 2015

Access to Finance for Micro-Enterprises and SMEs

Targeted Impacts

Perspectives for Your RegionCountries specialize where they are competitive

Transborder exchange increases

Regional integration becomes plausible

International partnerships become possibleDr. Daniel Stanislaus Martel

CTAP Advisor

02.05.2023 20

Capacity Building in Trade Institutions of Central Asian Countries of COMCECIstanbul, 3rd – 5th February 2015

Access to Finance for Micro-Enterprises and SMEs

Roles for Policymakers – Your Opportunity

Dr. Daniel Stanislaus MartelCTAP Advisor

Source: Elaborated by Author

Policy-maker

MicroSME

FinancialInstitution

WINWINWIN

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Capacity Building in Trade Institutions of Central Asian Countries of COMCECIstanbul, 3rd – 5th February 2015

Access to Finance for Micro-Enterprises and SMEs

Conclusions

The Future is YoursHigher motivation for Micro-Es and SMEs

More opportunities for financial entrepreneurs

A more robust national economy

Improved regional integration?

Dr. Daniel Stanislaus MartelCTAP Advisor

02.05.2023 22

Capacity Building in Trade Institutions of Central Asian Countries of COMCECIstanbul, 3rd – 5th February 2015

Access to Finance for Micro-Enterprises and SMEs

W I N

Final Conclusion

Dr. Daniel Stanislaus MartelCTAP Advisor

Source: Elaborated by Author based on Abrams (2002), Stein (2010), and Turner (1997)

Micro-Es, SMEs

Financial Institutions

WIN

WIN

YOU

And

YOUR

Policymaking

Outpu

ts

Outcomes

Outcomes

Impact

Outputs

Capacity Building in Trade Institutions of Central Asian Countries of COMCECIstanbul, 3rd – 5th February 2015

Access to Finance for Micro-Enterprises and SMEs

“?”“!!”

Dr. Daniel Stanislaus MartelCTAP Advisor 2302.05.2023

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Capacity Building in Trade Institutions of Central Asian Countries of COMCECIstanbul, 3rd – 5th February 2015

Access to Finance for Micro-Enterprises and SMEs

It was great working with you!

Looking forward to next time!

Daniel Stanislaus Martel

Private Sector Development Policy AdvisorCapacity Developerdmartel@bluewin.ch

Dr. Daniel Stanislaus MartelCTAP Advisor