Promoting SME development is a major challenge for both Governments and international agencies. Traditional approaches have not always proven effective, particularly in facilitating access to finance. Despite their dominant numbers and importance in job creation, SMEs have faced great difficulty in obtaining formal credit and equity. Commercial banks and investors have been reluctant to service SMEs for a number of well-known reasons, including high risks and transaction costs. The need for new approaches is paramount. There have been a number of advances in using innovative mechanisms that increase the profitability of lending to SMEs. Internet may offer the necessary tools to facilitate the development of such approaches. Internet-mediated electronic financial services, known as e-finance, can bring about drastic improvements in the costs and speed of delivery of those services. Hence there are expectations that SMEs might improve their access to finance through e-finance. This issues paper focuses on SMEs in the formal sector in developing countries and their access, to finance and e-finance and what can be done to improve that access including the use of the latest innovative mechanisms, as well as information technology
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International Institute for Trade and Developement : UNCTAD Collection
