The financing of small and medium enterprises (SMEs) and equity markets can play a critical role in fostering economic productivity by financing innovation. That's the central premise of a new World Bank Group paper, which discusses the components of an SME-friendly market architecture and links to policies that foster a new class of investable equities.
More than 24 countries in emerging markets operate separate boards and exchanges aimed at SMEs, the paper says. But only a few SME exchanges function properly, providing coveted fresh capital and liquidity. The key steps to building an efficient exchange to provide risk capital for SMEs are addressed in detail.