94916 I F C A D V I S O RY S E RV I C E S | AC C E S S TO F I N A N C E Access To Credit Among Micro, Small, And Medium Enterprises I n 2010, IFC conducted a study to estimate the number Total Gap in Relative Terms of micro, small, and medium enterprises (MSMEs) in the • Total gap: About 52–64 percent of microenterprises (31.2–44.8 world, and to determine the degree of access to credit and million) in developing economies are unserved or underserved: use of deposit accounts for formal and informal MSMEs. dd About 29–35 percent of formal microenterprises (17.4– The study used primarily data from the World Bank 24.5 million) in developing economies are unserved;5 Enterprise Surveys (ES).1 The overall results from this study dd About 23–29 percent of formal microenterprises (13.8– were published in “Two Trillion and Counting.”2 While data 20.3 million) in developing economies are underserved.6 for the formal sector differentiated among micro, very small, • About 18–22 percent of formal microenterprises in developing small, and medium enterprises, the limited amount of data economies are women-owned firms that are either unserved or available for the informal sector made it difficult to discern underserved (11.5–14.0 million). a similar level of disaggregation for the informal MSME • Globally, 38–46 percent of formal microenterprises do not sector compared to the formal sector.3 As a result, data for the informal sector was presented in an aggregated form, but need credit. evidence suggests that informal enterprises tend to be mostly Total Credit Gap, in U.S. Dollars micro and very small in size. In 2011 the data was revisited • The gap in credit financing of formal microenterprises is as new enterprise surveys became available. The resulting $0.5–0.6 trillion, including high-income OECD countries: database, IFC Enterprise Finance Gap Database, covers 177 dd The total credit gap in developing economies is estimated to countries.4 This fact sheet summarizes and highlights the key be $0.4–0.5 trillion. data points available for the formal micro, formal SME, and • Women-owned businesses have an estimated financing gap of the aggregated formal and informal MSME sectors. about $154–188 billion. Formal Microenterprises Total Deposit Gap, in U.S. Dollars • The total deposit gap for microenterprises is $195-238 billion There are about 70–90 million formal microenterprises globally, including those in high-income Organisation for Economic in developing economies.7 Co-operation and Development (OECD) countries. About Source of Financing 78–85 percent of formal microenterprises (60–70 million) are • Private commercial banks: 69.5 percent; in developing economies (see Figure 1). • State-owned banks and/or government agencies: 21.4 percent; • Non-bank financial institutions: 5.8 percent; • Other: 3.3 percent. Figure 1: Regional Variations in Credit Gap for Formal Microenterprises 8 6 4 4 Europe and Central Asia 23 19 5 4 13 2 3 3 Middle East and North Africa East Asia and the Paci c 12 11 7 9 8 4 1 3 South Asia Latin America and the Caribbean 9 7 6 3 Sub-Saharan Africa Number of Micro Enterprises (Millions) Credit Gap (Percent of Unserved & Underserved) >70 50 – 60 <40 IBRD 40161 | JULY 2013 This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information Micro With Checking With Loan/ Unserved + 60 – 70 40 – 50 NO DATA shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any Enterprises Account Overdraft Underserved endorsement or acceptance of such boundaries. Source: IFC Enterprise Finance Gap Database (2011) Formal Small and Medium Enterprises • 82–86 percent of the value of formal SMEs’ credit gap (i.e., There are about 36–44 million formal small and medium $0.8–0.9 trillion) in developing economies comes from enterprises (SMEs) globally, including those in high-income SMEs that already have a deposit account; OECD countries. About 65–70 percent of these (25–30 • Women-owned businesses have about $260–320 billion in million) are in developing economies. About 31–38 percent unmet financing needs; (8–10 million) of formal SMEs in developing economies are • The gap relative to current outstanding SME credit varies owned fully or partly by women.8 Very small enterprises rep- widely across regions, e.g., Sub-Saharan Africa and Middle resent 54–68 percent of formal SMEs (see Figure 2). East and North Africa (MENA) require more than a 300 percent increase in outstanding SME credit compared to Total Gap in Relative Terms 7–8 percent and 25–30 percent in East Asia, and Eastern • Total gap: 55–68 percent of formal SMEs (13.8–20.4 Europe and Central Asia, respectively. million) in developing economies are unserved or underserved: Total Deposit Gap dd 35–43 percent of formal SMEs (8.8–12.9 million) in • 16–23 million formal SMEs in developing economies (62– developing economies are unserved; 76 percent of total SMEs in developing economies) have a dd 20–25 percent of formal SMEs (5–7.5 million) in bank account; developing economies are underserved. • 24–30 percent of formal SMEs in developing economies • About 57–71 percent of women-owned SMEs (5.3–6.6 (6.0–9.0 million SMEs) do not have a deposit account; million) in developing economies are either unserved or • Total U.S. dollar deposit gap has been estimated to be underserved. between $300 billion and $360 billion. • Globally, 27–33 percent of formal SMEs do not need credit. Source of Financing Total Credit Gap, U.S. Dollars • Private commercial banks: 57.6 percent (about 55 percent • Total value gap in credit financing of formal SMEs is $1.5– for very small firms; about 65.3 percent for small and 1.8 trillion, including high-income OECD countries; medium firms); • The gap in credit financing of formal SMEs in developing • State-owned banks and/or government agencies: 30.1 economies is $0.9–1.1 trillion; percent (even distribution across very small, small and • 42–51 percent comes from medium enterprises, 29–36 medium firms); percent from small enterprises, and 19–23 percent from • Non-bank financial institutions: 11 percent (about 12 very small enterprises; percent for very small firms; about 4–5 percent for small • The formal credit SME gap ($0.9–1.1 trillion) is equivalent and medium firms); to 26–32 percent of current outstanding SME credit; • Other: 1.3 percent. Figure 2: Regional Variations in Credit Gap for Formal SMEs 3 3 2 2 Europe and Central Asia 12 8 2 7 2 1 1 2 Middle East and North Africa East Asia and the Paci c 2 2 3 3 1 2 2 0 South Asia Latin America and the Caribbean 4 3 3 1 Sub-Saharan Africa Number of SMEs (Millions) Credit Gap: Unserved & Underserved (Percent) >70 50 – 60 <40 IBRD 40160 | JULY 2013 This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information 60 – 70 40 – 50 NO DATA shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any Formal With Checking With Loan/ Unserved + endorsement or acceptance of such boundaries. SMEs Account Overdraft Underserved Source: IFC Enterprise Finance Gap Database (2011) Formal and Informal MSMEs • 41–50 percent of informal and formal MSMEs in There are approximately 420–510 million informal and developing economies do not need credit. formal MSMEs in the world, including those in high- • Micro, informal MSMEs, and nonemployer firms account income OECD countries. Of these, 15–19 percent are for more than 90 percent (160–190 million) of all unserved MSMEs in developing economies. formal microenterprises and 70–80 percent are informal MSMEs and nonemployer firms. In developing economies, Total Credit Gap, in U.S. Dollars there are 360–440 million formal and informal MSMEs • The value of the gap in credit financing for all MSMEs, (see Figure 3), 139–170 million of these (32–47 percent of including micro, informal MSMEs, and nonemployer total MSMEs) have one or more women owners where the firms in high-income OECD countries, is estimated to be majority of women-owned MSMEs (112–137 million) are in $3.2–3.9 trillion globally; the informal sector. • The value of the gap in credit financing for informal and formal MSMEs in developing economies is $2.1–2.6 Total Gap in RelativeTerms trillion; • Total gap: 45–55 percent of informal and formal MSMEs • The value of the gap in credit financing for MSMEs with at in developing economies (200-245 million enterprises) are least one female owner in developing economies is $750– either unserved or underserved: 920 billion (32–39 percent of the total MSME credit gap). dd 36–44 percent of informal and formal MSMEs in developing economies are unserved; Total Deposit Gap, in U.S. Dollars dd 9–11 percent of informal and formal MSMEs in • The total value of the deposit gap for formal and informal developing countries are underserved. MSMEs is estimated at $3.3 trillion to $4.1 trillion • 46-56 percent of women-owned formal and informal globally. MSMEs in developing economies are unserved or Source of Financing underserved: • Private commercial banks: 45.9 percent; dd 37–45 percent of women-owned formal and informal • State-owned banks and/or government agencies: 28.3 MSMEs in developing economies are unserved; percent; dd 9–11 percent of women-owned MSMEs in developing • Non-bank financial institutions: 12.9 percent; economies are underserved. • Other: 12.9 percent. Figure 3: Regional Variations in Credit Gap for Informal and Formal MSMEs 20 12 6 10 188 Europe and Central Asia 92 21 62 9 3 10 23 Middle East and North Africa East Asia and the Paci c 78 52 34 36 25 27 11 13 South Asia Latin America and the Caribbean 40 18 22 4 Sub-Saharan Africa Number of MSMEs (Millions) Credit Gap: Unserved & Underserved (Percent) >70 50 – 60 <40 IBRD 40159 | JULY 2013 This map was produced by the Map Design Unit of The World Bank. The boundaries, colors, denominations and any other information Total MSMEs With Checking With Loan/ Unserved + 60 – 70 40 – 50 NO DATA shown on this map do not imply, on the part of The World Bank Group, any judgment on the legal status of any territory, or any (Formal & Account Overdraft Underserved endorsement or acceptance of such boundaries. Informal) Source: IFC Enterprise Finance Gap Database (2011) I F C A D V I S O RY S E RV I C E S | AC C E S S TO F I N A N C E Access To Credit Among Micro, Small, and Medium Enterprises Endnotes Data Sources 1 The analytical support for this initiative was provided by Formal Sector McKinsey & Company. Number of firms: IFC and World Bank, MSME Country 2 Stein, P., T. Goland, and R. Schiff. 2010. “Two Indicators, www.ifc.org/msmecountryindicators. Trillion and Counting: Assessing the Credit Gap for Percent of firms with loan or line of credit: World Bank Micro, Small, and Medium-Size Enterprises in the Enterprise Surveys. 2003-2010. www.enterprisesurveys.org. Developing World.” IFC and McKinsey & Company. Deposit data: McKinsey & Company, Global Banking Pools, 3 Formal-sector MSMEs: For the purpose of the study and 2008. solutions.mckinsey.com/globalbankingpools. analysis, microenterprises were defined as those with 1–4 employees; very small, 5–9 employees; small, 10–49 Informal Sector employees; and medium, 50–250 employees. Informal Ayyagari, M., T. Beck, and A. Demirguc-Kunt. 2007. “Small MSMEs were defined as all MSMEs that were not registered and Medium Enterprises across the Globe,” Small Business with the municipality or tax authority and all nonemployer Economics, 29, 415–434. firms, independent of registration. Informality Database by the International Institute for Labour 4 In 2011, IFC updated the quantitative results with analytical Studies of the International Labour Organization: Bacchetta, support from McKinsey & Company by including 17 M., E. Ernst, and J.P. Bustamante. 2009. Globalization and Informal Jobs in Developing Countries. ILO and WTO: updated Enterprise Surveys including 14 Latin American Switzerland. countries, China and India. In addition, 12 new Enterprise Surveys became available, 7 of which were from the Middle International Labour Organization. 2008. Global Employment East and North Africa. New informal-sector data also became Trends 2008: Recovering from a Second Jobs Dip. Geneva: available for 14 countries, and this was used as a basis to International Labour Organization. estimate the informal-sector credit gap. IFC Enterprise ILO Key Indicators of the Labour Market. 2009. Geneva: Finance Gap Database will be hosted by the SME Finance International Labour Organization, kilm.ilo.org/kilmnet. Forum at www.smefinanceforum.org. Schneider, F. 2002. “Size and Measurement of the Informal 5 Unserved enterprises are those that do not have a loan or Economy in 110 Countries Around the World.” Paper overdraft but need a loan. presented at the Workshop of Australian National Tax Centre, ANU, Canberra, Australia, July 17, 2002. 6 Underserved enterprises are those that have a loan and/or overdraft but have financing constraints. United Nations Development Programme. 2007. Human Development Report 2007/2008 Fighting Climate Change: 7 Deposit accounts are defined as checking, savings accounts, Human Solidarity in a Divided World. New York: United and term deposits. Nations. (Pages 299–301), hdr.undp.org. 8 The definition of women-owned SMEs is based on the World Bank Enterprise Surveys, www.enterprisesurveys.org. Enterprise Surveys definition, which asks whether at least one of the owners is female, or whether any of the females are owners. CONTACT Oya Pinar Ardic Alper 1 (202) 473-0752 | E-mail: oardicalper@ifc.org Martin Hommes 1 (202) 473-6650 | E-mail: mhommes@ifc.org www.ifc.org/accesstofinance AUG 2013