Closing Remarks by Princess Máxima UN Secretary-General’s Special Advocate for Inclusive Finance for Development G-20 SME Finance Data Working Group

Thank you all for your presentations and the time you took to come to The Hague. I would again like to thank the Dutch Foreign Ministry for hosting this meeting. They have performed a very important task.

For me, as the United Nations Secretary General's Special Advocate on Inclusive Finance for Development, this meeting is a fantastic event. Those who are familiar with my work since the 2005 Year of Microcredit know that I have been advocating for some time on the importance of data. So, this is for me very special.

While we have some promising starts, we need more and better data on financing for small and medium enterprises (SMEs), especially in developing countries. Data is essential to understanding the totality of financial inclusion. By this I mean I mean how financial services, as a means to an end, enable individuals, enterprises, communities and economies to grow and thrive.

A lot of work has been done on access to finance at the micro level. We should build on these efforts and experiences. Just as there should be no silos between microfinance and SME finance, there should be no silos in the data either. Doing things separately would give us the wrong insight in both sectors.

There is a huge gap in local financing in developing countries, as the presentations highlighted. Enterprises need more and diverse kinds of local financial services, and more quantity of all of them. They also need non-financial support, such as technical assistance and capacity building. Of course, SMEs require labor laws, access to markets, enabling legal regimes and many other conditions that you have mentioned in our discussions today. More and better data will help us to identify where the gaps exist, where barriers lie in demand and supply of finance, and the impact of specific interventions.

It is important to note the fact that we all agree on the importance of data and research. The question now is how we move forward to action. A primary consideration is the timeframe of key opportunities. Can we make initial recommendations for the G20 Summit in Canada in late June? And then we want to make concrete action recommendations for the G20 Summit in Korea November. This means putting forward a proposal to the G20 Financial Inclusion Experts Group in September. With this in mind, I recommend that the Working Group hold a conference call in July to discuss ideas, and then meet in person at the end of August to discuss specific action plans.

As you work on these action plans, another consideration is to identify practical actions that can be taken immediately in the context of a longer-term vision for data collection and dissemination. So I will speak about both short and longer-term actions.

In the short term, the following issues need to be addressed:

1 - We have had good presentations on both demand and supply side data on SME financing. But, where do these streams of data meet? Who puts all these pieces of the puzzle together? Without such, there is a risk that the data collection efforts end up in silos, which can lead to overlap and duplication. A puzzle-maker is needed to ensure that all the different efforts talk to each other, and to help us identify remaining information gaps.

2- On the supply side, I think it is clear that there are good data collection efforts and experiences, including at the IMF, CGAP and the World Bank in the Financial Access Survey, the MIX, IFC, and OECD in the pilot of the SME Finance Scoreboard.

First, we should bear in mind the data that can be collected from the regulators. By the end of August, the Chair of this Working Group will share with us a proposal for how these organizations could work together better. What kinds of data can central banks, regulators and ministries supply? Should we recommend proxies to determine size of enterprises? Several parts of government, such as ministries of labor, have leadership roles on SME development in a given country. What data can they share, and what kinds of data do they need for their leadership?

Second, there is the data streaming from funders and institutions. The MIX is a strong platform for helping to standardize information from the international and developing financial institutions. I would like thus to ask the MIX to prepare, by August and in consultation with these and other SME finance institutions, a proposal to include SME financing in its database. The proposal should bear in mind incentives for financial institutions (banks) to provide this information, more breakout of the SME finance done by MFIs, and also outsourcing of data collection at the portfolio level, as the group discussed today. Also, data being collected by DFIs and IFIs, such as the one presented today by the IFC, should be considered and harmonized.

3 - The other spectrum of data collection is the one analyzing the demand side. There are a number of strong surveys, including the Enterprise Survey, similar surveys in developed countries by the European Central Bank and the World Bank's household survey. The question is the integration of these efforts.

Thus, for August, the Chair will lead preparation of an action plan that addresses how to link and enhance existing surveys for seamless data collection and use. The Enterprise Survey does not, at present, include informal and rural businesses. When we capture more data on the informal sector, we will get more information on financial inclusion and poverty. A similar effect will be achieved when addressing rural SME finance, given the high percentage of rural poor without access to financial services. Thus, by the end of August there should be a plan on how to address this challenging issue. Questions include how to capture more of the microenterprise and the smaller size enterprises, from no to 10 employees? What questions are needed for household surveys to capture some of these and the small informal-sector activity?

In sum, we have agreed to come up with by the end of August proposals to work together on demand side and on supply side, ways to build on the MIX platform for more institutional data, and ideas for a process and organization to put all the pieces together. These are short-term action priorities.

There is also the long-term agenda.

One priority is impact. There are different impact measurements, including:

1- We still need the story of how SME growth contributes to job creation, economic development, equitable growth and income distribution, and poverty alleviation. Jonathan Morduch and research colleagues like Daryl Collins can help to do this. A group of researchers is already planning to meet shortly to examine some of these important questions.

2- We need to focus on the impact of public and private interventions on financing and financial structures, such as credit bureaus and payment systems. It is also important to consider the impact of non-financial interventions on SME growth, such as capacity building, access to markets transport and infrastructure, as well as other stakeholders such as labor laws and unions. Impact evaluations of government interventions are also very important.

The second long-term priority is introducing access to finance into the broader conceptualization of financial stability. In this case it is very important to determine what factors influence the demand side of SME finance, which ones influence the supply side and the consequent mismatch between the two. Variables such as exchange rates and interest rates can contribute to or hinder financial system stability.

A third long-term issue is how to replace proxies, like loan sizes, with more precise data on firm size, as well as to include deposits, and guidance on cut-offs. The ability to collect good data depends on building the capacity of involved institutions and IT systems upgrades. There may be opportunities to build on other existing data sources, such as public registries and commercial credit bureaus. We will also want to consider how to measure the contribution and impact of equity financing. Here, it is important to specify that this information could be useful not only for the public sector, but also for private sector wishing to invest.

Fourth, in the long-term, we want to harmonize definitions. Definitions are very complicated. The European Union has been trying for a long time on SMEs, and we haven't yet solved this in microfinance either. I encourage you to look at the Brookings study for alternative ideas.

A fifth and final long-term priority is how to share the information with the different users - private sector, regulators, providers and others-to help inform future investments and interventions. Provision of useful data in the right package to each audience will likely be best determined and led by the 'puzzle maker' who puts all the data pieces together.

In this regard, we should consider what other players should be at the table as we gather and assemble data, for example, the Bank for International Settlements, the Alliance for Financial Inclusion, public and private credit registries, IT system providers, the Financial Stability Board, and maybe business associations.

We have our work cut out for us. As Peer Stein urged this morning, we need to be practical and identify actions for today and tomorrow, while moving us toward longer-term data goals. It is important for a long-term framework to be comprehensive, consistent and scalable, and for it to relate to existing data collection efforts.

Of course all this work cannot be done in just one meeting. We are counting on the commitment of everyone here, and that of your colleagues, to make a meaningful difference in access to SME finance. I hope you will maintain the enthusiasm and energy of this Working Group when you are each at your own desk. I look forward to our continued conversations and collaboration, and thank you for making this such an exciting day.