The Asian Development Bank (ADB) published two books on SME finance recently; the Asia SME Finance Monitor and the joint study report with the OECD. The former reviews various country aspects of SME finance covering the banking sector, nonbank sector, and capital markets, aiming to support evidence-based policy making on SME finance in Asia and the Pacific. The latter takes a comparative look at ADB and OECD experiences of SME finance, aiming to identify promising policy solutions for creating an SME base that is resilient to crisis, from a viewpoint of access to finance. Both books addressed that poor access to finance limits the ability of SMEs to survive and grow and that limitations of bank lending require diversified SME financing models.

In Asia where bank-centered financial systems have been established, SMEs strongly depend on debt instruments. Accordingly, SME finance policies focus on bankability in many Asian countries, typically through developing public credit guarantee schemes. SME bankability is an important area to be continuously supported by the government, but we need to recognize two facts. First, SME loans make up still less than 30 percent of total bank lending on average in Asia and the Pacific despite many national measures provided to improve SME access to bank credit. Second, unexpected events like a financial crisis discourage banks to lend SMEs in order to mitigate credit risk and to survive such events. This suggests that the prudential requirement to ensure stable banking systems does not allow banks to easily expand lending to SMEs and that SMEs need to be able to access finance beyond conventional bank credit to grow further.

Economic expansion in Asia has created a foundation of growth-oriented SMEs with a need for access to long-term growth capital, in which the development of capital markets for SMEs has become a new challenge in SME finance. Economic integration in Asia, i.e., the ASEAN Economic Community in 2015, has also brought new financing demands from SMEs, such as funding in offshore currencies, provided that they are exposed to further liberalized trade and investment and that their internationalization is encouraged. Supply chain finance or value chain finance plays a critical role for vitalizing SME businesses in global markets and for enhancing the national and regional labor productivity. 

Under this rapidly changing environment, SMEs need to develop their business model with innovation to survive, and national policy makers need to prepare a comprehensive suite of policy options that support innovative and diversified financing models appropriately serving the financing needs of SMEs at different business stages.