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Banks and the Missing Middle: 7th survey in Latin America

Banks and the Missing Middle: 7th survey in Latin America

The “missing middle” is a concept that serves to illustrate the gap that exists in developing countries between a large number of microenterprises on one end and a few large companies on the other, while in the middle, there are only a few small and medium-sized
enterprises (SMEs); hence, the contribution that the SME segment makes to the national economy and employment is not as significant as it is in developed countries. Contrarily, in high income countries, SMEs have the largest number of businesses and are responsible for over 50% of gross domestic product (GDP) and over 60% of employment.
The Latin America and Caribbean (LAC) region is at the early stages of transformation, where a gradual increase in the number of SMEs is evident. The estimated SME financing gap amounts to $235 billion.

Several initiatives are currently being carried out in the region to close this gap. In addition to banks, there are microfinance institutions, factoring and leasing companies, venture capital funds, securities exchanges, etc. Undoubtedly, banks shall continue to play a key role in SME financing, but to address this topic with a broader perspective, this year’s edition of the report includes survey results for microfinance institutions which are becoming relevant market players, particularly at the bottom end of the SME segment.
2014 marks the tenth anniversary of this survey, which was launched by the Inter-American Development Bank (IDB) Group, by way of the Multilateral Investment Fund (MIF) and the Latin American Banking Federation (FELABAN), in order to understand the interest of commercial banks in exploring the potential of the SME market.

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