MSME Finance Gap
Micro, Small and Medium Enterprises (MSMEs) represent a significant part of the world economy, and are one of the strongest drivers of economic development, innovation and employment. Access to finance is frequently identified as a critical barrier to growth for MSMEs.This report re-estimates the finance gap pertaining to Micro, Small and Medium Enterprises (MSMEs) in Emerging Market and Developing Economies (EMDEs). It utilizes the same methodology as in the previous report (2017). It estimates the MSME finance gap at two points in time separated by four years. It also re-uses the same conceptual framework, methodology, and data sources. Thus, this report represents a first attempt at tracking the evolution of the MSME finance gap over time.
This report estimates that for 119 EMDEs around the world, there is a potential demand for MSME finance of US$10.3 trillion as of 2019. This compares to the credit supply of US$4.6 trillion. Consequently, there exists a financing gap attributed to formal MSMEs in EMDEs of US$ 5.7 trillion, which is equivalent to 19 percent of the gross domestic product (GDP) and 20 percent of the overall private sector credit supplied by banks to these economies. In addition to the finance gap in the formal sector, there is an additional US$2.1 trillion in estimated potential demand for finance from informal enterprises in developing countries. This figure is indeed sizeable, amounting to an equivalent of 8 percent of the GDP in these countries.
As access to finance for MSMEs continues to be a critical policy issue, the availability and analysis of cross-country data will become vital, especially gender-disaggregated data. The WBES remains the most comprehensible data source for firm-level data.
This report is published by IFC.