Responsible Finance Forum

Financing SMEs — Giving Credit Where it is Due: A Spotlight on the G20

Katie Koch and Jacey Jones
01 September 2016
Source:  Goldman Sachs Asset Management

Katie Koch of Goldman Sachs Asset Management provides an update to a 2014 Goldman Sachs report outlining the barriers to financial access facing female-owned SMEs around the world and why these business owners represent a substantial economic opportunity.

Introduction:
A decade ago, ten G20 countries; Argentina, Brazil, China, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa and Turkey, boasted some of the fastest growing economies in the world. Today, growth rates in many of these countries have fallen, hurt by factors including lower commodity prices and anemic global growth. One route to stimulate economic growth in these countries is to bolster the growth potential of female-owned small and medium sized enterprises (SMEs).

Globally, SMEs contribute significantly to employment as well as innovation and productivity and, particularly in developing economies, SMEs are the biggest contributors to job creation. While SMEs face many challenges, a significant hurdle is often access to finance, especially for female-owned SMEs due to gender-related factors. We estimate the total amount of formal financing needed but not available, the credit gap, amounts to more than $160bn for female-owned SMEs in these ten G20 countries. Applying findings from our research paper “Giving Credit Where It Is Due”, we estimate that if these focus countries were to close the credit gap for female-owned SMEs, real income per capita growth rates could be boosted by close to 90bps on average. If the credit gap is closed by 2025, incomes per capita could be on average nearly 15% higher by 2035 across this subset of countries, relative to our previous baseline scenario.