Small and Medium Enterprises (smes) Access to Finance in Selected East Asian Economies

Findings from ERIA’s SME research project in FY 2009 confirms that access to finance is amongst the most critical factors determining the competitive readiness of regional SMEs and their ability to fully exploit and participate in the global economy and business opportunities from regional economic integration and, in particular, participation in regional production networks. Well recognized in the literature, access to funding is the lifeblood of any enterprise, enabling it to grow, and to generate more output and employment. There is considerable evidence to support the contention that SMEs, in particular, face a number of obstacles and problems in accessing finance, mainly related to their limited resources and perceived risk by lenders. This is particularly problematic and worrisome for policy makers, given that SMEs and entrepreneurship are widely recognized as being the key sources of dynamism, innovation, and flexibility in advanced industrialized, emerging market and developing economies, and are major net job creators in these economies. Without access to finance, SMEs are unable to invest, impairing their capacity to: improve productivity; raise competitiveness; promote innovation; generate employment; and contribute to economic growth and development.