SME Financing: Regional financial initiatives

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Equity financing models in Asia and Australia

  • Government equity program
    • Korea established the fund of funds program in 2005
    • Chinese Taipei initiated the ‘SME Incubation Investment Trust Accounts’ in 2003
    • Japan invests into limited partnership for venture capital investment
    • Malaysia established two venture capital funds in 2000
    • Australia started the Innovation Investment Fund program in 1997
    • Thailand raised the OSMEP Venture Capital Fund in 2003
  • Indirect equity investment: role of investment networks through BANs
    • Canada and China build networks with angel investors and venture capitalists for high tech SMEs and start-up firms in incubators
    • Mexico installed the SMEs Investor Club
  • No equity investment
    • Philippines

Debt Financing Models in Asia and Australia

  • Direct loan program
    • Japan provides direct loan through
      1) the Japan Finance Corporation for Small Business, 2) National Life Finance Corporation, and 3) the Shoko Chukin bank; Japan‘s Credit Guarantee Corporations and JASME
    • Korea provides policy loans to SMEs; Korea‘s Credit Guarantee Fund (1976) and Technology Credit Guarantee Fund (1989)
    • Malaysia created SME bank in 2005 for financing and credit guarantee
    • China provide direct loans from the Innovation Fund (1999) and from the Funds for SME Development (2004)
    • Philippines established Small Business Corporation (1991)
    • Mexico operates the National SME Guarantee Program (2001) and Seed Capital Program (2005)
  • Credit guarantee program
    • Chinese Taipei does not provide direct loan programs, but established SME Credit Guarantee Fund (1974)
  • No direct loan program
    • Australia and Canada have market-oriented financial systems
    • Thailand has no direct loan programs unlike other developing member economies and most of Asian member economies

While Australia and Thailand governments are directly involved in creating Venture Capital Funds to provide investments for innovative SMEs, Canada, China and Mexico only participates in the network formation of market venture capitalists with start-ups. These economies do not have special banks or credit guarantee institutions for SMEs.

Loan-focused economies except Philippines have created equity investment programs in recent years especially targeting for high-tech innovative SMEs.

  • Economies in investment-focused group
    • They provide only small proportion for systematic direct loan facilities
    • These economies do not have special banks nor credit guarantee institutions
    • They directly involve in creating venture capital funds or actively participate in the network formation of venture capitalists
  • Economies in loan-focused group
    • Their financing programs are centered on special banks or guarantee institutions
    • Recent years, these economies (except the Philippines) have created equity investment programs targeting high-tech innovative SMEs.
    • Japan, Korea, and Chinese Taipei have the longest history of governmental loan programs
    • Malaysia and the Philippines have relatively newly established the public loan systems after the Asian crisis