MANILA, Sept. 7 (Xinhua) -- Poor access to finance and a difficult business environment are holding back Asia and the Pacific's small and medium-sized enterprises (SMEs) from contributing to the creation of economic wealth for development, the Asian Development Bank (ADB) said.
An evaluation report released on Friday by the Manila-based Asian Development Bank's (ADB) independent evaluation department highlights challenges and the mixed progress that governments and development institutions are experiencing in their efforts to advance SMEs.
"Governments are trying to create better operating conditions for SMEs, but not enough progress is being made in removing the many barriers preventing them from fully participating in market activities to the detriment of economic growth and social development," said Marvin Taylor-Dormond, director general of Independent Evaluation at ADB.
He said, "An approach to address systemic constraints faced by SMEs, including a poor business environment and financial infrastructure would be more effective and sustained than just providing credit lines to financial intermediaries for loans to SMEs."
The evaluation assessed 182 ADB operations with a total financing of 5.3 billion U.S. dollars supporting SMEs in 25 countries and regions in Asia and the Pacific from 2005 to 2017.
SMEs are the backbone of many developing economies in the world. The ADB estimates that SMEs make up about 60 percent of national labor forces in Asia and the Pacific.
Many countries in the region define small enterprises as those with 10 to 49-99 employees and medium-sized enterprises as those with 50 to 250-300 employees.
"A shortcoming in ADB's access-to-finance operations was their focus on providing credit lines to commercial banks for onlending to a selection of SMEs, which often took the form of largely standard loans already offered by these banks," the report said.
Often, the report said, more established enterprises benefited more than the core of underserved SMEs that struggle to get credit because of collateral requirements and the perception of a high risk of failure to repay.
"ADB needs to pay more attention to the developmental impact in its support for increasing SMEs' access to finance," said Binh Nguyen, the evaluation's lead author.
"Bringing finance to underserved SMEs and creating reliable clients can demonstrate the sector's viability to skeptical banks and have more long-term development results," he added.