Credits to Small Businesses and Microenterprises

This paper suggests that interventions can be justified in light of market imperfections biased against small and microenterprises (MSEs) such as:

• Banks prefer to lend to large enterprises;
• Lending to MSEs is considered to be risky;
• Administrative costs of lending to these enterprises are high and can sometimes reduce the profitability of such loans to almost zero;
• MSEs are often unable or unwilling to give precise information about themselves;
• They can rarely provide securities or collateral for their loans.

Another important reason for supplying credit to MSEs is that they have an important economic and social role to fulfil:

• They favour the development of the private sector, the promotion of women and the implementation of community development by private initiative;
• They reduce poverty and contribute to a fairer income distribution;
• They increase employment as are usually more labour intensive.

Outlines different views and approaches of international institutions involved in programmes supplying credit to these enterprises, namely the World Bank, the OECD and NGOs, SOS-Faim and RAFAD.