G-20's New Approach to Lack of SME Financing

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Oct 28, 2010, 12:01 ET

WASHINGTON, Oct. 28 /PRNewswire-USNewswire/ -- If there is one single key to reducing world poverty, creating jobs and wealth, and ensuring a global economic recovery it could be this: making sure the world's small and medium sized enterprises (SMEs) succeed.

Yet the financial sector essentially ignores these businesses. They are deemed too informal, or too risky, too small, or too big. And without the funding needed to grow, the vast majority of them will fail.

This must change. The G-20 countries know this, but tackling this complex challenge has proved difficult. Until now.

Partnering with Ashoka's Changemakers, a pioneer in online global competitions to solve social problems, the G-20 issued an open call for solutions to help unlock financing for SMEs – The G-20 SME Finance Challenge. The entries tackle the problem with deep creativity and from many angles. The best of them will be scaled up and expanded with millions of dollars and introduced at the Seoul Summit.

These solutions will pull millions into the middle class and stabilize the world economy. Still, SMEs have the power to do much more.

In Haiti, for example, when the earthquake inspired the world to give, SMEs were already picking up the pieces. Thanks to an existing relationship with the affected population and a vested interest in promoting a speedy and lasting recovery, they are the critical first-responders. And they stay long after the TV cameras go. Local companies are beginning to rebuild the nation's decimated power infrastructure, like RePower Haiti, which is offering long-term fixed price contracts to renewable energy SMEs repairing the power grid and creating jobs.

SMEs employ the very business practices the world talks so much about but has trouble implementing: environmental sustainability, human rights, and social progress.

One SME, in Brazil, protects the Amazon rain forest by employing indigenous rubber harvesters using traditional practices to produce latex profitably while preserving the forest. Just five percent of the world's population, but nearly one-third of the extremely poor, indigenous populations often live near our planet's greatest natural resources. This kind of small business solution, replicated many times over, would make a powerful one-two punch. Other SMEs are solving the world's housing crisis, brick-by-brick, revolutionizing property rights, and advancing women.

SMEs put women to work. We need many more of them. Women entrepreneurs repay their loans more consistently than men and reinvest more of their profits into their businesses. Women workers invest more of their income – up to 90% – in their families, and their education, improving their standing, and adding to their communities' economic and social stability.

Solving the SME finance conundrum is especially critical now: The global economy has been rocked, foreign aid is way down, and we are all increasingly interconnected. Small and medium sized businesses are leading the way to our future. They must succeed.

Many more solutions, statistics and resources can be found through Sarah Mintz, 415-939-0028, and here:

SOURCE Ashoka's Changemakers