Willingness to Access an SME Capital Market

Willingness to Access an SME Capital Market

The top three priorities on the supply side were (i) quickly raising funds for SMEs, (ii) simplified listing procedures, and (iii) information dissemination of SME capital markets, while these ranked fourth, third, and tenth on the demand side, respectively. Critical Factors to Create SME Market Simplified listing procedures, low listing and maintenance costs, and simplified disclosure requirements were the top three on the demand side, while these came in at tenth, fifth, and second on the supply side, respectively.

Both sides agreed that one of the top three issues was simplified listing procedures. Due to differences in SME financing and capital markets, the essential elements necessary to establish an SME market differ from country to country. However, a common issue in priority actions between the supply and demand sides is suggested by these findings: i.e., measures to make it easier for SMEs to access capital markets at lower costs. The expense issue is frequently addressed while laying out a SME market on the grounds that the market size is expected to be regularly little in scale.

Analysis of Demand Side 1. Instruments for Financing: Term Finance, Online Seller Finance, Pay Later, Merchant Cash Advance, Supply Chain Finance, and Taxi Finance are a Few of the Available Instruments for Financing SME. Even though these are one-of-a-kind, they highlight the need for specialized financial products to meet the specific needs of business loans.

2. Willingness to Access an SME Capital Market: The discussion focuses on whether or not there should be a separate equity financing and bond issuance venue for SME’s, regardless of the stock exchange market, in order to build a foundation of high-quality SME’s that drive long-term economic growth and growth that benefits the poor at the national level. Their willingness to enter an SME capital market was evaluated in the demand-side survey.

Overall, 77%, 83%, 82%, and 54% of SME respondents in the PRC, India (for equity), the Republic of Korea (for equity), and Malaysia (for equity) answered positively (combined yes and somewhat yes) to the question of whether or not they would use such a specialized market venue for their future funding if established. They tended to prefer to access the equity market over the bond market in the last three nations.

In four countries, the main reasons they prefer to enter the SME market are: (i) improved overall ease of funding; (ii) alternative sources of funding other than banks; and (iii) anticipated improvement in the company’s social credibility. In the meantime, they frequently stated that (i) the complexity of stock-issuing procedures and (ii) the cost of issuing stocks, such as listing fees and maintenance of their listed stocks, addressing equity finance, were the primary barriers to accessing the SME market. Given the potential demands placed on SMEs, this suggests that simple procedures and a low-cost structure are essential for designing a functioning SME capital market.