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Title:The role of banks in supporting the real economy
Date of publishing:September 24, 2014
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Category:News
Language:English
Also available in the following languages:Dutch, French

The role of banks in supporting the real economy
September 24, 2014

Small and medium Enterprises (SMEs) play a vital role in economic development as they are the main source of employment generation and output growth, both in developing as well as in developed countries. In Europe, SME’s represent more than 99% of all business providing two out of three of the private sector jobs and contributing to more than half of the total value-added created by businesses.

Access to finance is essential for SME’s in order to overcome liquidity constraints, exploit growth potentials, capitalize investment opportunities, and so on. The global crisis however exacerbated the financing constraints on SME’s. They have suffered a double shock: a drastic drop in the demand for the goods and services they provide and a credit crunch, forcing many into bankruptcy and contributing to record levels of unemployment in many countries.

Resulting from the above, fostering the access to financing for SME’s has become the focus of an international debate within the G20, the OECD and the UN, among others. In view of the current context Vigeo has analysed 200 banks worldwide on their support to social and economic development through the provision of products and services tailored to SME’s and start-ups, micro-finance and the cooperation with stakeholders to promote the access of small businesses to financial services.

The Vigeo research shows that supporting access to credit for SMEs appears as a common practice among the different geographical regions that were analysed with 68% of banks in Europe, 79% in North America, 66% in Asia Pacific and 68% from Emerging Markets reporting their support to SMEs. On the other hand, the provision of micro-finance as well as cooperation with stakeholders appears to be more widespread in Europe and North America. Even though 71,5% of the panel reported on facilitating SMEs’ access to credit or offering microfinance, Vigeo found that only 28%, or 56 out of 200 banks, disclose indicators allowing to measure the effectiveness of their efforts.

In addition the report stresses the positive effects for the financial sector in serving SMEs stating that their efforts may lead to new market opportunities. They may also have a clear impact on a banks’ reputation as the core business of the banking sector is to act as an intermediary to channel funds in support of the real economy.

Read the full Vigeo research report on this page