Vernieuwd Beleid Buitenlandse Handel en Ontwikkelingssamenwerking

Reactie

Vraag8

Small and medium enterprises (SMEs) remain significantly underserved by financial institutions. Research indicates that the credit gap that formal SMEs confront is about $1 trillion. The segment of capital largely missing to fund SMEs is also known as the “SME Finance Gap”. (World Bank)

Dutch government could do more to help close the SME Finance Gap. The Dutch Good Growth Fund (DGGF) provides a very limited and restrictive solution in this regard. The DGGF Track 1 (loans & guarantees) is open only to Dutch SMEs investing in their subsidiaries in one of the eligible countries on the condition that the Dutch company has a controlling stake (read: >50% shareholding) in the investee. The very limiting and restrictive condition explains why so few companies have so far made use of DGGF Track 1. DGGF Track 2 on the other hand is a fund-in-funds programme, providing capital to impact investments funds which generally invest equity and quasi-equity in local SMEs. This again is a very limiting and restrictive solution as most SMEs would prefer debt financing (loans) on appropriate conditions.

We recommend that DGGF Track 1 be opened to SMEs in eligible countries:
(1) in which a Dutch company has a minority stake;
(2) which are planning an investment that is of strategic importance to a Dutch company (e.g. as its long-term supplier of tropical fruit or as its local reseller).

Ideally, DGGF Track 1 should be open for all SMEs in eligible countries with high-impact investment propositions. European development banks, including FMO, generally do not cater for the SME segment that require loan sizes of €500,000 and €5 million to grow. FMO, DEG, Proparco, etc. claim they also can finance SMEs but in practice rarely provide loans below €10 million as smaller transactions are considered unprofitable and thus they mainly finance large companies. Only BIO Invest (Belgium) and Finnfund (Finland) serve the SME segment with loans between €1 million and €5 million. We recommend that the Dutch government supports a loan programme providing loans for high-impact SMEs in eligible countries, accepting the fact that this programme may not be financially profitable / 100% revolving.

Vraag9

Insofar development banks provide SME Finance, we experience that they are very risk averse (only expansion projects, high collateral requirements, guarantees) while charging very high upfront (due diligence and closing fees) and management (monitoring fees) costs and interest rates that result in high cost of capital for borrowers in developing countries. Borrowers, in turn, must price that high cost of capital into the selling price of their goods and services. In other words, at the end of the day, it makes products or services less affordable for local consumers, and thus this compromises the very impact that development banks want to support.

We also recommend that the Dutch government takes note of DEG’s Up-Scaling programme, which provides repayable grants (zero-interest loans, repayable in 5 years) of €500,000 (to be at least matched with fresh equity from investors) to early-stage companies with innovative and scalable high-impact solutions.