SME Financial Inclusion for Sustained Growth in the Middle East and Central Asia

This paper by the IMF offers empirical evidence that greater financial inclusion of small and medium enterprises (SMEs) can promote higher economic growth and employment, especially in the Middle East and Central Asia regions. Firstly the report shows that countries with higher SME financial inclusion exhibit more effective monetary policy transmission and tax collection. Secondly, it finds substantial employment and labor productivity growth gains at the firm level from access to credit, gains that are higher for SMEs. The report has evidence of a substantial positive impact on SME employment and labor productivity growth from improved credit bureau coverage and insolvency regimes. Finally, cross-country aggregate evidence confirms the employment and growth gains from SME financial inclusion, which appear larger in the Middle East and Central Asia than in other regions.