Role of SMEs in Asia and the financing challenges they face

Naoyuki Yoshino, Farhad Taghi Zadeh Hesary

Research output: Chapter in Book/Report/Conference proceedingChapter

Abstract

Small and medium-sized enterprises (SMEs) are the backbone of the Asian economy. They make up more than 96% of all Asian businesses, providing two out of three private-sector jobs on the continent. Therefore, it is vital for Asia’s economic success that fully functioning support measures for SMEs are in place. However, SMEs face major challenges in accessing cheap finance, mainly because of the asymmetric information problem between suppliers and users of funds and high transaction costs. These lead to more collateral requirements for lending to SMEs with higher lending interest rates, which hinder their growth. As most Asian countries are bank-dominant economies, capital market financing is not a realistic option for SMEs. Therefore, we need to look for solutions that simplify banks’ lending to SMEs. This chapter will highlight the difficulties faced by SMEs in accessing finance and provide measures for mitigating them. The remedies proposed in this chapter include the development of a credit information infrastructure for SMEs, the utilization of credit-rating techniques for SMEs to address the problem of asymmetric information, and the development of a sustainable credit guarantee scheme to resolve the collateral issue.

Original languageEnglish
Title of host publicationUnlocking SME Finance in Asia
Subtitle of host publicationRoles of Credit Rating and Credit Guarantee Schemes
PublisherTaylor and Francis
Pages3-22
Number of pages20
ISBN (Electronic)9780429684579
ISBN (Print)9781138353428
DOIs
Publication statusPublished - 2019 Jan 1

Fingerprint

Financing
Small and medium-sized enterprises
Asia
Lending
Asymmetric information
Finance
Functioning
Transaction costs
Private sector
Capital markets
Asian countries
Credit rating
Credit
Bank lending
Remedies
Credit guarantee
Economics
Asian economies
Interest rates
Information infrastructure

ASJC Scopus subject areas

  • Economics, Econometrics and Finance(all)
  • Business, Management and Accounting(all)

Cite this

Yoshino, N., & Taghi Zadeh Hesary, F. (2019). Role of SMEs in Asia and the financing challenges they face. In Unlocking SME Finance in Asia: Roles of Credit Rating and Credit Guarantee Schemes (pp. 3-22). Taylor and Francis. https://doi.org/10.4324/9780429401060-1

Role of SMEs in Asia and the financing challenges they face. / Yoshino, Naoyuki; Taghi Zadeh Hesary, Farhad.

Unlocking SME Finance in Asia: Roles of Credit Rating and Credit Guarantee Schemes. Taylor and Francis, 2019. p. 3-22.

Research output: Chapter in Book/Report/Conference proceedingChapter

Yoshino, N & Taghi Zadeh Hesary, F 2019, Role of SMEs in Asia and the financing challenges they face. in Unlocking SME Finance in Asia: Roles of Credit Rating and Credit Guarantee Schemes. Taylor and Francis, pp. 3-22. https://doi.org/10.4324/9780429401060-1
Yoshino N, Taghi Zadeh Hesary F. Role of SMEs in Asia and the financing challenges they face. In Unlocking SME Finance in Asia: Roles of Credit Rating and Credit Guarantee Schemes. Taylor and Francis. 2019. p. 3-22 https://doi.org/10.4324/9780429401060-1
Yoshino, Naoyuki ; Taghi Zadeh Hesary, Farhad. / Role of SMEs in Asia and the financing challenges they face. Unlocking SME Finance in Asia: Roles of Credit Rating and Credit Guarantee Schemes. Taylor and Francis, 2019. pp. 3-22
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