Financial restrictions of small and medium-sized enterprises

The article presented analyzes a set of results showing that small and medium-sized enterprises (SMEs) are more constrained by funding and other institutional obstacles than large enterprises, exacerbated by weaknesses in the financial systems of many developing nations. We use the access-frontier concept to explain how the difficulties in managing risk and the transaction costs involved in lending to SMEs make financial institutions and markets reluctant to reach this group especially in developing countries. It analyzes different policies and reforms that can attract financial institutions and markets to lend to SMEs and comment on the role of government in institutional strengthening, provide the regulatory framework and undertake pro-market activist policies.