SMEs' difficulty accessing credit is aggravated by the current crisis
Small businesses are the drivers of growth and job creation on both sides of the Mediterranean. Nevertheless, in both North and South, they have problems obtaining bank loans to finance their expansion and fulfil their potential. Fostering their development is a major challenge and one the six main aims of the Union for the Mediterranean.
The current banking is crisis is making it even more difficult for small businesses to obtain loans and threatening entire economies. Just as in Europe the EIB has launched a massive SME support plan, FEMIP has kick-started the debate on appropriate solutions for the Mediterranean countries.
Four practical proposals emerging from the conference
1- Informing SMEs better about available bank finance and how to access it. There is a need to improve the flow of information between commercial banks, SMEs and public authorities through regular meetings and round tables.
2- Diversifying FEMIP's action. FEMIP already supports small businesses, having channelled EUR 1.5 billion to them since 2002 through credit lines to local commercial banks, private equity and stakes in microfinance institutions. It needs to diversify its offer by bringing out guarantee products, helping small firms to invest in R&D and trade internationally. In partnership with other institutions operating in the region, FEMIP could also arrange local currency loans as soon as governments grant it access to markets on the same terms as other international institutions.
3- Continuing to help channel migrant remittances through banks. FEMIP estimates that these are worth EUR 12 to 14 billion a year. It has got together with nine European and Mediterranean banks to discuss how to provide banking products tailored to the needs of migrants and their families - lowering the cost of remittances, offering mirror-image services on the two sides of the Mediterranean facilitating business start-ups or involving microfinance. The aim is to direct remittances towards growth-promoting productive investments.
4- Helping to modernise the local banking system local through better in-bank training. Commercial banks frequently steer clear of financing small firms that have a risk profile that is high but difficult to quantify. They must be provided with technical assistance to help them develop credit risk assessment tools and strengthen their SME financing capacity.