ABSTRACT

Access to finance is a major concern for businesses in Central Asia. This chapter considers the constraints that must be overcome to improve access to finance, particularly for small and medium-sized enterprises (SMEs). The chapter identifies five major constraints that weigh on SMEs’ access to bank credit, which accounts for the bulk of their financing options: tight credit conditions, stringent collateral requirements, complex and lengthy lending procedures, limited information about SMEs’ creditworthiness, and low financial literacy.

The chapter then looks at the strategies and instruments that governments in Central Asia have developed to reduce these barriers, ranging from the improvement of the overall financial framework to the development of financial literacy strategies and the enhancement of public financial institutions, such as SME funding agencies and credit guarantee schemes.

The chapter concludes by drawing on the practices of Central Asian and Organisation for Economic Co-operation and Development (OECD) countries to suggest six policy recommendations to governments in the region: involve SMEs and financial institutions more closely in the policy process, develop credit information institutions, improve the transparency and operations of SME funding agencies, develop credit guarantee schemes, introduce sound framework conditions for the development of alternative financing (non-credit options such as leasing, factoring and private equity), and implement financial literacy strategies with a focus on SMEs.

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