// EDITOR’ S QUESTION //

OECD data from close to 50 countries worldwide show that in 2023 alone, SME interest rates rose by 6 %, accompanied by higher borrowing costs and stricter collateral requirements.

As a result, bank lending to SMEs fell by 9 %, a drop not seen since the Great Financial Crisis. Other forms of finance also fell, including asset-based finance and venture capital investments – down 34 % in 2023.

Amid growing uncertainty around the business and financing environment, how can SMEs access the resources they need to invest and grow?

The answer lies in better leveraging existing financing tools – and embracing new ones. From targeted public investment to sustainable finance and FinTech innovation, opportunities exist to reverse this downward trend.

Venture capital, which has expanded eight-fold over the last 15 years, remains out of reach for most SMEs. New government backed funds are targeting specific SME segments, such as women-owned businesses or GreenTech or DeepTech firms.

Governments have also been working to boost business awareness and skills to help SMEs attract investors – an approach that is key to the UK’ s Clean Growth Fund, France’ s FrenchTech 2030 and the European Innovation Council Accelerator.

Sustainable finance is another fast-growing source of capital. Global sustainable debt reached US $ 800 billion in the first half of 2024 alone; yet SMEs are often unaware – or unable – to access this finance. A key barrier is sustainability reporting.

Efforts are underway to streamline requirements and foster convergence across SME reporting frameworks. The OECD Platform on Financing SMEs for Sustainability is contributing to this by developing guidance for SME sustainability reporting to financial institutions.

Financial technologies offer an additional option to strengthen flows of finance to SMEs. FinTech tools can make the loan application process more intuitive and provide faster, more accurate assessments of credit risk for smaller firms, provided safeguards are in place to avoid bias and protect data.

New platforms also allow payments, lending, insurance and other financial products to be embedded into apps and online tools – referred to as embedded finance for SMEs. Supply chain finance is also leveraging digital innovations, including digital infrastructure for payments and e-invoicing and big data and AI for analytics.

To seize these opportunities, SMEs need not only access, but knowledge of and trust in these solutions. There are a range of initiatives to boost financial and digital skills. In Singapore, the SME Go Digital programme is just one example of using digital solutions to bridge digital skills gaps while offering financial support for AI adoption and tools for e-invoicing.

Despite current roadblocks, if we create the conditions for SMEs to better tap into existing and emerging financing instruments, they can continue to invest, grow and forge a path towards resilience and sustainability. �

VENTURE CAPITAL, WHICH HAS EXPANDED EIGHT-FOLD OVER THE LAST 15 YEARS, REMAINS OUT OF REACH FOR MOST SMES.

Intelligent SME. tech

23