A new OECD report, “Financing SMEs and Entrepreneurs 2022: An OECD Scoreboard” shows that outstanding SME loans increased significantly during the first year of the pandemic. The median stock of SME loans increased by 4.9%, the highest upturn registered since the OECD Scoreboard was created 10 years ago1. This was underpinned by a strong increase in government-provided loan guarantees (up 110% y-o-y in 2020), debt moratoria, as well as direct lending to SMEs (up by 17% y-o-y in 2020).
Emergency support measures – including monetary policy interventions by central banks – also pushed interest rates down to record lows, with the median SME interest rate of Scoreboard countries falling by 0.4 percentage points in 2020, the largest reduction since 2009.
In most economies covered by the Scoreboard, unprecedented support measures helped avoid a wave of insolvencies: in median terms, bankruptcies fell by 11.7% in Scoreboard countries in 2020. As countries phase out support measures – and firms see increased pressure from energy costs – bankruptcies and insolvencies are expected to increase going forward.
The report says it is vital that government recovery packages continue to provide targeted support to viable SMEs and entrepreneurs in need. The war in Ukraine, and the resulting humanitarian and economic crisis, reinforce the importance of support and access to financing for SMEs and entrepreneurs.
🗨️“SMEs will be key to deliver the jobs growth needed to boost the recovery.
And their engagement is also essential to address the major challenges of our time, such as the transition to net zero emissions by 2050” – @MathiasCormann, Secretary-General
— OECD SMEs, Regions, Cities & Tourism (@OECD_local) March 29, 2022
SMEs make a major contribution to the labor market and have the potential to play a key role in driving the green transition and in ensuring energy security. The report says they need access to a broader range of financial tools and instruments to strengthen their resilience.
Speaking at the report’s launch, OECD Secretary-General Mathias Cormann said “Support measures and favorable lending conditions have left many SMEs with higher levels of debt that will need to be tackled going forward. In particular, SMEs need better access to alternative financing instruments to reduce their dependence on debt and provide greater flexibility and resilience in these volatile economic times.”
SMEs account for the majority of employment and output across OECD economies. They will need to thrive if the world is to succeed in securing a recovery that is strong, sustainable, and resilient. However, SMEs have received relatively less attention in national recovery packages than during the crisis. According to OECD analysis, SME support through debt, grants, and deferral instruments amounted to USD 32 billion (or 4.5% of total support) in recovery packages, compared to more than USD 3,136 billion (40% of total support) in previous measures taken to support SME’s weather the immediate effects of the pandemic.