The SME Program’s research focuses on three key constraints to SME growth:


Access to Finance

Access to finance allows firms to take advantage of growth and investment opportunities, and the accessibility and affordability of capital can, therefore, determine an enterprise’s growth potential. Despite the importance of financial access for growing firms, credit constraints are consistently reported as one of the major obstacles for SMEs. It is estimated that over 55% of all SMEs in developing countries have an unmet demand for external financing.
SMEs represent a particularly difficult market for financial institutions. The due diligence processes that banks use to assess default risks for large companies are too costly to apply to SME applicants. At the same time, SMEs require loans that are too large and risky for microfinance institutions to provide, resulting in a gap in financing options for SMEs.
To address these challenges, innovations in the traditional lending process must be tested. The SME Program develops and implements research projects that evaluate programs designed to reduce the risk and cost of lending to SMEs.  These studies assess a range of mechanisms including increasing the efficiency of the lending decision-making process; improving the reliability of screening tools; promoting the use of non-traditional forms of collateral; and reducing the likelihood of default through practices such as relationship lending. A study in India, for example, tested the impact of a program in which loan clients received regular calls from bank officers. These personalized relationships resulted in better repayment behavior, thereby reducing the risks associated with lending to SMEs.
View studies in this research area here.

Human Capital and Skills

A number of recent studies by SME Program researchers demonstrate that managerial practices play an important role in determining a firm’s growth trajectory. A study in Mexico, for example, showed that consulting for micro, small, and medium sized firms resulted in increased productivity and employment. However, there is little consensus on the best and most cost-effective ways to improve managerial skills. Many governments and development agencies invest in training programs for entrepreneurs. Yet, evidence indicates that business owners often implement only a few of the practices taught in trainings and that, in many cases, these changes are not enough to significantly improve firm performance and increase profits.
There is a need for further research on the most effective approaches to improving managerial capital. The SME Program supports projects that test innovative programs designed to improve managerial capacity. In particular, the Program aims to build on the current evidence by identifying the specific mechanisms contributing to a capacity building program’s success or failure, such as the delivery format or curriculum.
View studies in this research area here.

Access to Markets

In developing countries, markets are often fragmented, illiquid, and sometimes even non-existent. These problems are especially challenging for small businesses that may lack the capacity or contacts to build their own dedicated supply chains or market access strategies. The informality of these markets can also limit firms’ abilities to write efficient contracts, secure production inputs, or sell products or services at competitive prices.
The SME Program supports research that evaluates programs and policies designed to facilitate market access for SMEs. A study in Egypt, for example, assessed the impact of a program designed to improve market access for small Egyptian carpet-making businesses by matching them with buyers in Western markets. The Program develops projects that assess the barriers that prevent SMEs from entering product markets; identify the best ways to integrate SMEs into high value-added supply chains; and evaluate the impact of market entry regulation on SME growth and survival.
View studies in this research area here.