2017年-世界发展银行全球_Fixed_Income_Instruments_to_Mobilize_Institutional_Investors_for_SME_Financing_in_EMEs_38页_1mb

Summary of Fixed Income Instruments to Mobilize Institutional Investors for SME Financing in EMEs

Core Content

Emerging market economies (EMEs) face a significant funding gap in SME financing, estimated at $0.9 to $1.1 trillion as of 2011. Traditional funding sources such as government and bank financing are insufficient to meet this demand, and institutional investors are increasingly seen as a potential alternative. These investors, particularly pension funds and insurance companies, hold about USD $5 trillion in assets under management, making them a viable source of capital for SMEs.

The G20 Report and accompanying Policy Notes focus on fixed income instruments that can help mobilize institutional investors for SME financing, with an emphasis on the challenges and preconditions for their successful deployment.

Main Instruments and Their Potential

The following fixed income instruments are analyzed in the document:

• Corporate bond issuances by SMEs
• Corporate bond issuances by SME lenders
• Securitization of SME loans
• SME debt funds
• Covered bonds

Key Takeaways

• SMEs are better suited for bank financing due to their small size, informal nature, and limited information. Institutional investors are less likely to invest in individual SME bonds due to size and risk concerns.
• SME bond funds can help overcome these challenges by pooling smaller bonds, offering diversified risk-return profiles, and providing specialized expertise.
• Refinancing SME lenders via capital markets is a more promising avenue for institutional investment, as it allows investors to support lending institutions that then provide capital to SMEs.
• Securitization and covered bonds offer potential for integrating bank and asset-based lending with capital markets, but they require robust legal and regulatory frameworks.
• Institutional investors in EMEs are generally more attracted to plain vanilla instruments, such as corporate bonds, due to their familiarity and lower risk.

Key Challenges and Preconditions

Supply Side

• Limited pipeline of bankable SMEs: Many EMEs lack sufficient midcap SMEs and standardized SME loans that can serve as underlying assets for capital market instruments.
• Underdeveloped credit infrastructure: Weak credit bureaus, lack of movable collateral recognition, and poor insolvency frameworks hinder the assessment of SME creditworthiness.
• Need for legal and regulatory frameworks: EMEs require legal structures to support securitization, covered bonds, and fund structures, including bankruptcy-remote SPVs and clear definitions of eligible assets.

Demand Side

• Rigid investment frameworks: Some EMEs have overly prescriptive rules that limit investment in alternative assets, such as SME instruments.
• Limited analytical capacity: Domestic institutional investors in EMEs often lack the skills to evaluate complex instruments, which may require stronger risk analysis capabilities.
• Preference for highly rated securities: EME investors typically favor traditional, highly rated instruments, making credit enhancements such as guarantees or insurance essential for new SME instruments.
• Tax treatment: A clear and favorable tax framework is necessary to ensure that SME instruments are not disadvantaged compared to government or banking products.

Enabling Environment

• Developed fixed income market: A deep and liquid government bond market is a prerequisite for the introduction of more unconventional instruments.
• Basic market infrastructure: Reliable payment systems, central securities depositories, and custodians are necessary to ensure safe and efficient transactions.
• Credit rating services: Robust and transparent methodologies for rating SME debt are important for investor confidence.
• Strong regulation and supervision: Ensuring market transparency and integrity is critical for building trust among investors and market participants.

Role of Governments and Development Institutions

• Comprehensive policies: Governments should develop strategies and action plans to address the SME financing gap, with a focus on both supply and demand side challenges.
• Enabling environment: It is essential to create a supportive legal and regulatory framework for capital market instruments.
• Stakeholder involvement: Strong leadership and collaboration among public and private stakeholders are necessary for the successful implementation of such strategies.
• Development institutions: These entities can support EME governments by providing advice, acting as honest brokers, designing risk-sharing mechanisms, and participating in demonstration transactions.

Recommendations

Enabling Environment

• Continue to develop the government yield curve and money markets
• Encourage the development of basic market infrastructure and information services
• Ensure macroeconomic stability and a clear tax framework

Supply Side

• Increase the pipeline of "bankable" SMEs by improving credit information and collateral systems
• Develop legal frameworks for securitization, closed-end funds, and covered bonds
• Create offering regimes tailored for institutional investors

Demand Side

• Reform investment frameworks to allow alternative asset investments
• Implement strong risk management requirements and capacity-building programs
• Develop clear, simple, and transparent structures for instruments, especially securitization
• Establish risk-sharing mechanisms, including guarantees, under a robust framework

Conclusion

While institutional investors can play a role in SME financing in EMEs, their involvement is constrained by both supply and demand-side challenges. The development of a supportive legal and regulatory environment, along with the creation of a reliable and liquid fixed income market, is crucial. Additionally, improving the quality and transparency of SMEs and their related assets will be necessary to attract institutional investment. Development institutions and governments must work together to design and implement strategies that integrate both banking and capital market solutions for SME financing.