2. SMEs Regulatory Environments
Government has a very important role to play in the development of its SMEs sector by providing both financial and non-financialsupport to promote SMEs.A favourable regulatory environment for SMEs play a significant role in contributing to SMEs operational performance and growth in many developed and developing countries. An effective regulatory framework will promote competition, while restrictive regulatory environment will adversely affect SMEs. The regulatory framework may also have an impact on the incentives of banks’ leading to SMEs.
This chapter will provides a systematic review of the regulations that governs SMEs and SMEs Islamic financing in selected countries. A survey will be sent out to regulatory bodies in selected countries to gauge views on issues revolving SMEs and SME finance. In addition, this section will also address a number of key issues on SMEs from regulatory perspectives as follows:
Do SMEs need a regulatory framework?
What aspect should be covered in the SMEs regulatory framework?
What are the effect of rules and regulations (i.e. economic, structural etc.) on SMEs growth and financing?
How do we harmonize the different regulatory frameworks governing institutions in different jurisdictions? Is there a need for such harmonization? If so, how do we develop a unified and integrated framework for the SMEs?
Should there be a cap on the size of SMEs?
Should SMEs financing be made compulsory? Alternatively, should there be an incentive based regulatory framework to induce the practice of SMEs? If so, what would be the best way to propagate such a framework?
How to establish an effective internal supervisory framework in relation to SMEs?
3. Internal Markets
To be discussed with the World Bank
4. Digital Platform
To be discussed with the World Bank
5. Ratings
To be discussed with the World Bank
6. Movable Collaterals
To be discussed with the World Bank
7. Conclusion and Recommendation
Based on the analysis of the fourchaptersabove, this chapter will make policy recommendations with respect to SME development and effects of accessing finance on SMEs. The policies will be based on a holistic consideration of the realities in particular pertaining to Islamic FIs and seek to enhance the reach of Islamic FIs in meeting the financing needs of the SMEs.
4. Methodology
This report was prepared using a mix of desk research and primary survey/interviews with industry participants and subject matter experts, including banks,government organizations, small and medium enterprises, and SMEs associations.Key elements of the methodology includes:
Expert inputs, including drafting the report by the core teams from the World Bank and IRTI;
A survey on the state of the industry; data collection from governments, banks, supervisory bodies, SMEs and SMEs associations;
Expert review by the World Bank, IRTI, and other relevant subject matter experts;
A series of interactive presentations and roundtable feedbacks, which will aim at soliciting constructive comments from key stakeholders at different forum
