Access to Finance for SMEs

Lending to Small and Medium Sized Enterprises (SMEs), including micro businesses, remains at the top of the agenda for governments around the world. With various political and economic incentives introduced to support SMEs, it is important not to overlook the practicalities of institutional arrangements for access to finance, especially in the environment of prudent lending. This proposed seminar series brings together practitioners and academics in order to discuss the most pertinent issues of SME finance and of credit risk, with a view to setting a research agenda relevant to lenders and regulators. The government reports that the current support scheme appears to be working well, but banks have been criticised for their reluctant handling of the scheme. Critics emphasise that the uptake is far below the last year's Small Firms Loan Guarantee Scheme, but the British Banker's Association confirmed that total lending to SMEs rose. The government scrutinises the scheme and it was noted that banks were increasing charges and fees and require more personal security. New initiatives include the launch of the British Business Bank, local banks and credit unions. The German partners will contribute a comparative element for the institutional environment drawing upon. The German Kreditanstalt fuer Wiederaufbau (KfW) is considered to be a successful role model.

Participants will engage in debate and invite keynote speakers from academia, government agencies and industry. Social science research will be promoted by drawing on leading researchers and through interaction of speakers and attendees, which will include breakout sessions related to sub-schemes such as micro finance, the role of regional funds, gender and development agencies. There has been a string of reports on SME lending, funding and equity gaps. Now is the time to take stock, draw it all together and make a preliminary assessment of the various initiatives in light of those reports.

There is an abundance of academic literature related to the context of the project, see for example the seminal article by Thorsten Beck and Asli Demirguc-Kunt (2006), of which a brief review is attached in the Case for Support document.

Through this new seminar group we aim to achieve societal impact, in particular on economic growth and entrepreneurship by supporting better access to finance through our plans for dissemination and communication. We will develop a website, hosted on the page of the established DM Centre for Entrepreneurship at Bournemouth University, through which the seminar series will be promoted, papers will be summarised and made available for downloading, and links to related events and institutions will be set up. We also plan to open a 'discussion room' and to make podcasts of highlights from the seminars. We will promote the site, the seminars and associated outputs, and related events to academic and policy users through our existing mailing lists which cover the UK and international community. All the participants have an extensive network of research contacts across academic institutions, government and NGOs in the UK and internationally. Examples include the mailing lists of the European Association for Comparative Economic Studies (EACES), the Money Macro Finance Group (MMF) of the Royal Economic Society, the Institute for Small Business and Entrepreneurship (ISBE) and the DM Centre for Entrepreneurship. These lists are regularly updated and will be extended further by the connections forged through this seminar series. We will target early career researchers and research students, and will reserve places at each seminar for this constituency supported by a dedicated budget line for those requiring financial support to be able to attend. An application to undertake a Special Issue of the International Small Business Journal, the leading UK and European Entrepreneurship journal, will be undertaken and we will use the seminar paper contributions as the basis for an edited volume (which may include some additional commissioned contributions). We will publish a shorter policy oriented paper in an appropriate outlet preceded by a suitable press release and will also seek to generate an associated article in the press (e.g. The Financial Times, The Economist, The Guardian, The Independent, The Times). We will use academic and policy conferences as platforms for additional promotion and dissemination of the series findings, for example by drawing on the outputs in plenary presentations and roundtable discussions (e.g. the conferences of EACES, MMF and ISBE). These outputs will enhance the knowledge economy, as new knowledge will be generated through academic impact.

Economic and societal impact will be achieved by influencing public policies at local and national level. Current examples are community banks (Bank of Bournemouth), the recently launched British Business Bank and the Enterprise Finance Guarantee (EFG) scheme, all designed to generate better access to finance for small businesses. This will also involve legislation, in particular in the area of financial regulation. One lesson from the recent financial crisis is that if banks are seen as too big to fail, they might actually be too big to exist and need restructuring. Banks' behaviour will also be influenced, as standard high street banking is questioned by different approaches (for example Swedbank and Metro Bank). This indicates that the project will have international impact, as most of financial regulation (certainly within the European Union) is of international character. An illuminating example is EU state aid legislation, which did not allow the British Business Bank to be modelled on the German KFW. Primary beneficiaries are SMEs, which will translate in increased entrepreneurship and economic growth. Ultimately the economic competitiveness of the UK will be strengthened, which in turn will lead to rising employment levels. This impact will be measured quantitatively, for example, by change of private sector employment and turnover generated by SMEs. The contribution to new job creation will be of particular interest, as this will feed into GDP growth.