Small business

4.5 Developing the SME finance sector
Objective: To work effectively with the existing finance sector in order to help them develop markets and innovative
institutional approaches to meet new areas of need.  
The most rapidly growing component of the finance sector for SME development is microfinance. A
wide range of different microfinance models exists, some of which are more sustainable than others (see
Annex 9.16). Public sector support can be used to encourage the development of sustainable markets, not
only by creating a sound regulatory framework for microfinance but also by encouraging the existing
commercial banking system to move into small business lending. As with counselling services, there is
growing pressure for ensuring that microfinance becomes commercially sustainable. 
The different target markets for microfinance range from the poorest of the poor to the more
sophisticated small/medium enterprises. The government role in this respect is to ensure that these
markets are developed in such a way that the right instruments are available for the different types of
customer. As in the case of training and counselling, governments can develop standards to enhance the
capacity of microfinance institutions and to promote suitable training. 

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