Moving the needle – SME financing in emerging markets

Small and Medium Enterprises (SMEs) are vital for the economic and social development of emerging economies. These businesses generate revenues for the national exchequer and create new employment opportunities. However, lack of access to finance still remains a barrier.

SMEs are ideally placed to penetrate the underserved markets located in developing economies. They can be vital drivers of innovation, job generation and growth in countries with cheap and skilled labor. Surveys show that SMEs are responsible for generating up to 45% of jobs in emerging market economies and up to 33% of their national GDP.

Yet, SMEs fall into the ‘missing middle’ as they are too large to qualify for microfinance but too small to obtain loans from international institutions. SME finance is severely constrained in many developing countries, thus restricting business growth.

Barriers to finance

According to the latest World Bank report, 65 million SMEs are constrained from credit. With the demand for SME finance being $8.9 trillion and it supplies being $3.7 trillion, it has resulted in a financing gap of $5.2 trillion! Also, SME financing is less likely to be supported by bank loans. Instead, they rely on internal funding, or cash from friends and family, to launch their enterprises.

Approximately 70% of small and medium-sized enterprises in emerging markets lack access to credit as they can’t provide collateral or maintain proper books of accounts. However, to enable small businesses to obtain finance for their operational needs, Bajaj Finserv provides collateral-free funds which require minimal documentation and doesn’t require an appraisal of the value of assets.

Production Cost and Infrastructure

Adequate infrastructure supported by a steady flow of working capital is essential for flourishing in an emerging economy. However, SMEs have restricted access to finance, thereby reducing their operational choices in terms of factors of production, distribution, and marketing.

Similarly, inflation can increase the total cost of borrowing for entrepreneurs. As production volumes fluctuate according to changing consumer demand during the calendar year, SMEs need funding that can be tailored accordingly.

Bajaj Finserv SME Loans offer a Flexi Loan Facility that allows for the withdrawal of money as and when required from the approved loan limit with interest being charged only on the amount utilized, lowering EMIs up to 45%. This ensures that the flow of working capital stays constant and production costs don’t fluctuate.

Technology and Market Research

Intensive market research needs to be done, in order to test and validate the product concept, especially in markets where competition is tough. SMEs need heavy equipment, production facilities, skilled manpower, and IT systems in order to catapult their small business into substantial growth.

To accelerate growth, Bajaj Finserv SME Business Loans provide a variety of short-term and long-term finance options.  All you need to do is share your basic details to check out your pre-approved offer.

Global Value Chain and Business Expansion

In emerging economies, SMEs make for better partners for large international MNCs as they’re well aware of the local market conditions. Similarly, by increasing their participation in global value chains, SMEs gain access to foreign markets and state of the art technology. Bajaj Business Loans provides financial aid to SMEs, in order to help them go up the value chain and increase their presence in international emerging markets.

Women-led SMEs

The SME finance gap for women entrepreneurs needs to be bridged, with the rapid rise of women-led small businesses. To tackle this deficit in the capital, Bajaj Finserv offers Small Business Loans for Women at nominal business loan interest rates, with easy eligibility criteria and quick approval.

Designed to help SMEs explore their business potential and flourish in emerging markets, Bajaj Finserv SME Loans meet their financial requirements in a timely, easy way. Entailing minimal documentation, collateral-free funds up to Rs.30 lakh, a unique Flexi loan facility, and quick approval in just 24 hours, Bajaj Finserv SME Loans provide a hassle-free experience for your SMEs.

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