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

I would like to start by thanking the G-20 and the IFC for organizing this G-20 SME Finance Data Working Group and for inviting me to be its Honorary Chairwoman. I would specially like to thank Susanne Dorasil and Peer Stein for their leadership that has brought us to this day. And many thanks to the Dutch Ministry of Foreign Affairs for all its help facilitating the logistics of this meeting in this historic building. I am excited for the opportunity we have, and am thrilled to welcome you all to The Hague for this inaugural meeting.
As you may know, last September UN Secretary General Ban Ki-moon designated me his Special Advocate for Inclusive Finance for Development. This was after some years of participating in different UN fora on this subject, including the 2005 Year of Microcredit. That I am here with you today is evidence of how our understanding has grown from the need for microcredit to the broader set of isues around access to finance.

What do I mean by this? Financial Inclusion means universal access, at a reasonable cost, to a wide range of financial services provided by a diversity of sound and sustainable institutions. And it means access not only for households, but also for small and medium enterprises, which are often the engines of growth and sources of jobs in local and national economies.

The objective of this Working Group is "to ensure the establishment of a comprehensive, consistent and scalable framework and mechanism to measure and track the progress over time of SME access to financial services in the developing World." [1] One of our tasks is to prepare recommendations for the G-20 on comprehensive methodologies to collect data.

Why does data matter so much?

First, high quality, comparable data on access to financial services gives us deeper insight into who, and which firms, have access to which kinds of services in different countries, and where barriers may lie, for example in lack of access or issues of supply.

Second, data helps us identify knowledge gaps, and priorities for policy.

Third, data allows us to monitor the effectiveness of policies over time.

And fourth, data enables researchers to understand better the effect of policies and the impact of increased financial access.

Put simply, better data will improve our understanding of the challenges, and help us to design better policy responses.

The good news is that we are not starting from scratch. You all have already been hard at work collecting data, and have built a strong base.

In talking about gathering data and using it effectively, there are three issues we should be discussing.

Firstly, do we still need research and data to demonstrate that SME development will enhance economic growth? What about the re-distributional effect that can take place as poor people obtain jobs? The reality is that we don't seem to know enough about the link between SME development and poverty alleviation. We've not yet marshaled the solid evidence - or the compelling stories - that will convince policy makers that SME development deserves a higher place on their agendas.

Secondly, if we can make the case for SME development more forcefully, and underline the critical importance of finance, we will need to focus squarely on the constraints that are preventing increased access. What kind of information is the private sector looking for to become a greater financier of SMEs? What type of data do governments need to take the right policy steps? And the same goes for donors and NGOs.

Thirdly, learning from the microfinance sector, we need to look at data on the amounts and types of financing in conjunction with data on other efforts that will enhance the growth of the SMEs, such as technical advice. Small businesses need many things in addition to finance and focusing solely on financing can sometimes work adversely. There is no silver bullet.

Overall, there is much we can learn from the experiences of microfinance. There are building blocks on financial access at the micro-level that we can leverage for the SME data. These include initiatives such as the IMF and CGAP/World Bank work on supply side data collection, and the MIX for institution-level data collection. And many of the leading researchers are the same.
The lack of a clear and common definition of SMEs is a major barrier to our work. Definition challenges are common in microfinance as well. What is microfinance in Eastern Europe seems like corporate finance in Sri Lanka, but that should not constrain us from trying to make data comparable. Of course, there will be other issues specific to small and medium enterprises, including formal and informal sectors, definitions of enterprises, and levels of sophistication of the product.

So, one opportunity is to learn from microfinance data experiences for SME data. Another opportunity is to leverage the commonalities in data to help to increase financial inclusion across the value chain.

Overall, I have found that the obstacles to growth of micro and SME finance are very similar. They are subject to the same macroeconomic factors, level of interest rates in a given country, stability of foreign exchange rates, regulatory obstacles (like interest rates caps to just mention one), and complicated legal environments or weak payment systems. Like households, small and medium enterprises need diverse kinds of financial services in addition to credit. Savings accounts, insurance and payments are equally important - for SMEs as well as households.

Almost by definition, entrepreneurs do not start out running mid-sized companies. Most start small and move up the value chain. The boundary between the microentrepreneur and the small companies is blurry. In terms of access to finance, some of the small enterprises will be served by MFIs through upscaling. Some will be served by commercial banks that are reaching down in the market. How do we gather comprehensive data on the range of SMEs and how finance helps enterprises to grow, if we think of these separately?

So, Ladies and Gentlemen, it is very important that we do not build silos between microfinance and SME finance. We shouldn't do that in regulation frameworks, we shouldn't do that from the financial institution side and therefore, we shouldn't do that on the data side either.

One of our tasks as a Working Group is to identify those common elements that we should draw upon from the micro-level, and what data elements are specific to SME, so that we can then come up with an action plan and recommendations for the G-20.

Of course, this is a big agenda. This first workshop provides us an opportunity to identify our common interests so we build a platform for sustained exchange, sharing of learnings and identification of opportunities for action, to collect, analyze and distribute data that is useful.

I look forward to vibrant discussions today. Thank you.