HGSMEs

1
HGSMEs InnovationAccess to Finance Module

• A Proposal for a Pilot Survey Questionnaire
• (Draft)

2
The Objectives of the Pilot Survey
The Main Objective
Detecting and Tracking Financing Gaps !
What for an approach?
Limited advantages from a static approach the
analysis of financing gaps must vary according to
firm size and sector of activity
Determining wether debt and equity finance
vehicles display a different impact on firms
growth, taking firm size and sector of activity
into account
Collateral Objective
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3
The Surveys Target
High Growth and Innovative SMEs

1. Because of their pioneering role in economic
   growth.
2. Because of their easier access to risk capital,
   that allows for a fair comparison of the
   (allegedly) different impacts of debt and equity
   finance on growth.

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4
Main Features of the Survey Questionnaire (1)

• Two different but parallel level of analysis
• Growth-Oriented Investments and Expenditures
• Financing Vehicles

The survey will highlight not only the firms
demand for every category of financing vehicle,
but also its causal link to specific forms of
investments!
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5
Main Features of the Survey Questionnaire (2)

• Firms will be requested to specify
• The total amount of new Growth-Oriented
  Investments and Expenditures made during the
  reference year.
• The amounts of new Growth-Oriented IEs directed
  to the following sub-categories ICT, PRODUCT,
  PROCESS and HUMAN RESOURCES.
• How, in percentage terms, the 4 amounts of the
  previous point were subdivided into (suggested)
  components.

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6
Main Features of the Survey Questionnaire (3)

• Firms will be requested to specify
• How new Growth-Oriented Investments and
  Expenditures were financed, by indicating the
  total amount covered through Debt and/or Equity
  finance.
• How, in percentage terms, total amounts of Debt
  and Equity were subdivided into single Debt
  and/or Equity financing vehicles.
• Whether planned Growth-Oriented IEs have been
  somehow affected by an inability in borrowing
  sufficient funds.

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7
Main Features of the Survey Questionnaire (4)
Specific sections surveying the relationship
between firms and debt/equity finance providers.
Objective ?
Trying to determine the exact source of possible
financing gaps Are they demand-side or
supply-side?
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8
Main Features of the Survey Questionnaire (4bis)
How to define the exact nature of financing gaps?

• By exactly determining the temporal sequence of
  active and passive interventions of all possible
  finance providers (Who was the first provider the
  firm applied to? Successfully or unsuccessfully?)
• By demanding the firm to indicate all possible
  reasons that could explain its failure in
  reaching agreements with debt and/or equity
  providers

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9
The Policy Implications (1)
Usually claim they have a restricted access to
financing due to shortage of supply
SMEs
Claim there is plenty of unplaced financing due
to low average quality of firms investment
projects
FINANCE PROVIDERS
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10
The Policy Implications (2)
POLICY MAKERS
What policy to foster Access to Finance?
Demand-Side Oriented
Supply-Side Oriented
Policies aiming at improving HGISME investment
readiness and fostering the quality of their
growth strategies.
Policies aiming at easing access to bank loans
for HGISMEs, usually by means of state guarantee
schemes.
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11
The Policy Implications (3)
POLICY MAKERS
.the Current Situation
Absolute prevalence of supply-side-oriented
supporting policies
Increasing commitment towards rationalization of
public spending
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12
The Policy Implications (4)
to conclude, an example of the main policy
issues addressed by the survey questionnaire

• If almost all public policies supporting SMEs
  access to finance aim at reducing restrictions by
  compensating finance providers for higher
  operational risks
• and if, as it seems to be, there is no clear
  evidence of any global shortage of financial
  resources to invest

Arent we by chance just fuelling market
imperfections by not focusing on the demand-side
in order to improve the investment readiness of
firms, while preferring to act through risk
compensation schemes that might produce
inefficient spending??? (additional resources
would flow right were they are already available)
P. Sicari OECD Statistics
Directorate