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H. Kent Baker and Leigh A. Riddick

Print publication date: 2012

Print ISBN-13: 9780199754656

Published to Oxford Scholarship Online: May 2013

DOI: 10.1093/acprof:oso/9780199754656.001.0001

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Alternative Financing Methods

Alternative Financing Methods

Chapter:
(p.547) 26 Alternative Financing Methods
Source:
International Finance
Author(s):

JAMES MOORE

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780199754656.003.0026

Small and medium-sized enterprises (SMEs) play a critical role in economic development in developing countries by furnishing needed goods and services to consumers, creating most employment opportunities, and driving innovation. Yet, these enterprises face numerous hurdles when seeking credit and debt options in the form of short- and medium-term financing. This problem is particularly acute in developing economies where SMEs represent a disproportionately small percentage of the overall number of private enterprises. Conversely, in many of these economies micro enterprises and large firms face a far less challenging environment for finance access due to structural legacies in the local banking industry and recent innovations in the area of microfinance. Despite the challenges faced by SMEs, a new breed of financial intermediary has begun to demonstrate successful lending relationships with firms once considered unbankable. Deploying a modified version of an existing lending technology known as "value chain lending," these financial players have introduced a new and effective tool whose use highlights new banking opportunities for both local and international firms in a market segment primed for growth.

Keywords:   value chain finance, social lending, small and medium-sized enterprise banking, economic development

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