Speech delivered by Sir Suma Chakrabarti, EBRD President, to SME Finance Forum, London
Ladies and Gentlemen, Undersecretary Dağdaş, Colleagues,
Good morning! I am very pleased to welcome you here today to the G-20 IFI/DFI SME Finance Forum, which we are hosting for the first time at the EBRD. It was a welcome coincidence for us that we are able to host this gathering in the year of the Turkish Presidency of the G-20. Turkey became EBRD’s largest country of operations last year, and we are very engaged in the country, particularly with respect to small and medium-sized enterprises.
These SMEs represent the backbone of well-functioning market economies. New firms usually enter the market small, often in the form of micro enterprises. And when they become successful, they grow into SMEs or sometimes even beyond. Not every company that is formed by two college dropouts in a garage goes on to become Apple Inc., but it is the millions of small businesses which keep the economic clock ticking.
New companies are usually formed because they believe they can bring something new or better to the market, be it a product or a service. Translating this first impulse into a business is the first entrepreneurial step. Keeping a business going is then often an even more daunting task. It is like riding a bike at high speed while juggling eight burning torches. From production to financing, from accounting to labour regulations – the challenges are huge and omnipresent.
But it is worth the effort. The benefits for the economy and society at large are great. SMEs create jobs. They can be innovation laboratories. And they serve as bellwethers for the more general business environment.
If we look at a country’s SME sector, we also learn about the state of the wider economy. For example, conditions that help small and medium-sized enterprises to grow, such as a supportive business climate or a competitive environment, are also the prerequisites for faster economic growth in general.
While the SME sector is traditionally agile and dynamic it is also particularly vulnerable. Access to finance, capacity building or simply finding a sympathetic ear is much more difficult if a company is restricted by its very size. This is why Governments are well advised to create an environment where small enterprises can prosper. And this is also why we, the international financial and development institutions, have a special role and responsibility to support this sector.
Research like the recent World Bank/EBRD Business Environment and Enterprise Performance Survey (BEEPS) provides evidence that access to finance remains the major obstacle for companies to develop their businesses. It is less that there are no funds available. But more about how to access these funds. Often transaction costs and collateral requirements make it harder and less affordable for small businesses to obtain the credit they need to grow. In order to support a viable and sustainable SME sector we need to find a reasonable balance between tighter lending regulations and the legitimate needs of the real economy.
This event today and tomorrow is a real step forward in our efforts to take on this challenge. I am very pleased that so many different institutions are gathered at this conference. I am certain the impressive panels and workshops you have ahead of you will produce important insight to inform our future work.
In this context I would like to congratulate especially the Turkish G20 Presidency on the choice of priorities for their chairmanship and for the activities taken to date. Undersecretary Dağdaş, we look forward to your opening remarks.
As we understand, Turkey has pursued 3 “Is” in its G20 presidency:
- Investment,
- Inclusion and
- Implementation.
These three “Is” fit well with the EBRD’s work in the SME sector:
We have launched a Small Business Initiative to improve our capacity for investment in SMEs. We have streamlined our approval processes to make it easier for our smaller clients and for our bankers to prepare investments specifically designed towards the needs of SMEs. We have created a dedicated business group bringing together our investment and advisory teams to ensure that we approach our SME clients and our co-financiers and donors with an integrated offer. We are modernizing our offer on the market, with innovative products aimed at SMEs, and we are linking our advisory services with investments in SMEs, both through local intermediaries, and directly from the EBRD. Finally, we are combining our investment work with policy dialogue to improve the business environment for SMEs, working in tandem with colleagues from the World Bank Group, donor organisations, and national authorities.
Inclusion has become a key priority of the EBRD, starting with our successful “Finance and Advice for Women in Business” programme, which we have launched in five countries to date, with a further 11 anticipated. In addition we have made inclusion an issue which runs through all our investments.
For example, we are helping young graduates secure work in leading IT companies in Sarajevo and we are combining investment in a road building programme in Serbia with vocational training for long-term unemployed. The first results are encouraging and show that business rationale and inclusion go hand in hand. We are now expanding this approach to all our regions where economic inclusion is a priority, such as in the Southern and Eastern Mediterranean.
Implementation – the third I – is critical for our work. The EBRD measures success by results, which we report to our Board every quarter. I think that the Government of Turkey has undertaken some crucial steps to ensure that the G20 priorities and recommendations are actually implemented.
Among these is the establishment of the World SME Forum, the WSF, an advocacy body for SMEs. I want to congratulate the Turkish government on this initiative and offer our partnership to the WSF in its work.
If Turkey will forgive me, there is in my view a fourth “I” that logically follows from implementation, and that is impact. In the last two years, the EBRD has put in place a results framework to measure and better report the impact of our work. Today I am happy to say we are having a big impact in many areas. For example, our advice to SMEs over the past two years alone has led to a material increase in turnover and productivity, as well as more than 13,000 new jobs created in the firms we advise.
Ladies and Gentlemen, you have a really exciting agenda for the next two days, with speakers from across the globe discussing a wide range of topics. These topics are all close to the “four Is” I have mentioned – investment, inclusion, implementation and impact. I am absolutely certain you will have intensive and fruitful discussions.
