Downscaling Financial Services to Latin American SMEs
Abstract
In this paper, the SME financial sectors of Brazil, Mexico and Chile are studied in
order to understand some of the obstacles to Small and Medium Enterprise (SME) financing
in Latin America and to offer solutions on how the Inter-American Bank’s Multilateral
Investment Fund can encourage growth of SME financing. This gap in financing found
in Latin America is important because SMEs contribute to a dynamic growing economy.
When we compare Brazil, Mexico, and Chile as a group to the non-regional counterparts
of Korea and Spain, we find fewer funds available for investment, weaker legal protections,
and less developed human capital. When we compare across countries, we find that
Brazil’s heavy government involvement and bureaucracy imposes high costs that stifle
SME growth and private sector efficiency, while Mexico lacks strong financial guidelines
and protections necessary for a nascent SME sector. Chile represents a strong partnership
with a proactive and involved government partnering with commercial banks and SMEs
in order to grow a healthy SME financial sector. In order to tackle the risk aversion,
human resource failings, and institutional barriers that hinder SME financial sector
growth, the MIF should develop materials or provide technical advice to banks and
governments on how to specifically focus on the SME segment through specialized marketing
and information efforts, working capital credit options, prioritizing institutional
challenges, training of staff to better serve and understand the SME client, and lastly,
on developing government SME loan guarantees that share risk between government entities
and private sector banks.
Type
Master's projectDepartment
The Sanford School of Public PolicyPermalink
https://hdl.handle.net/10161/3576Citation
Davis, Cameron (2011). Downscaling Financial Services to Latin American SMEs. Master's project, Duke University. Retrieved from https://hdl.handle.net/10161/3576.More Info
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