SMEs contribute to industrial development and economic growth in developing countries.
One of the targets of the ninth Sustainable Development Goal set by the United Nations is: "Increasing the access of small-scale industrial and other enterprises, in particular in developing countries, to financial services, including affordable credit […]"
Growth in the SME sector is often hampered by a lack of access to capital and by poorly developed and excessively bureaucratic business environments, challenging regulatory environments, and difficulties in enforcing legal contracts.
Private equity funds and financial institutions contribute to economic growth by promoting the entry of new firms (SMEs), encouraging enterprise growth and innovation, and reducing risk.
A World Bank report (2013) states that well-functioning financial systems identify and fund those firms with the best prospects, not simply those firms with the strongest political connections, and that this improves the capital allocation and fosters economic growth.
Read more about how financial institutions and Private Equity Funds contribute to development here.