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Small business lending has hit new heights during the pandemic

Outstanding SME loans rose sharply in the first year of the Covid-19 pandemic, according to a new OECD report titled Financing SMEs and Entrepreneurs 2022: OECD Scoreboard. the international organization based in Paris.

Thus, the median outstanding loans to SMEs increased by 4.9%, the strongest growth recorded since the creation of the OECD Scoreboard, 10 years ago, it is indicated in a press release.

This increase is explained by the sharp increase in public loan guarantees (+110% year-on-year in 2020), debt moratoriums, but also direct loans to SMEs (+17% year-on-year in 2020), adds the ‘Organisation for Economic Co-operation and Development.

According to the same source, emergency support measures, in particular monetary policy interventions by central banks, have also pushed interest rates to historically low levels, the median interest rate for loans to SMEs in the countries covered by the Scoreboard lost 0.4 percentage points in 2020, the largest drop since 2009.

In most of the economies studied, unprecedented support measures have averted a wave of bankruptcy filings: indeed, the median number of bankruptcies fell by 11.7% in 2020 in the Scoreboard countries.

→ Read also: EU: willingness to support Moroccan SMEs

The combined effect of the gradual lifting of support measures and the pressure that rising energy costs are putting on businesses, it is likely that the number of bankruptcies and insolvencies will start to rise again. , notes the OECD.

And to clarify that the report shows that it is essential that public recovery plans continue to provide targeted support to viable SMEs and entrepreneurs who need it. The war in Ukraine, and the resulting humanitarian and economic crisis, reinforces the importance of aid and access to finance for SMEs and entrepreneurs.

SMEs play a major role in the labor market and have the capacity to fully contribute to the green transition and energy security. According to the report, they need to be able to access a wider range of tools and financing instruments to build their resilience.

Speaking on the occasion of the official presentation of the report, the Secretary-General of the OECD, Mr. Mathias Cormann, affirmed that “support measures and favorable loan conditions have driven SMEs towards levels of high indebtedness that will have to be reabsorbed. In particular, SMEs must be able to access other financing instruments more easily in order to reduce their dependence on debt and gain flexibility and resilience in times of economic instability”.

According to OECD analysis, support for SMEs in the form of loans, grants and payment deferrals accounted for more than USD 3.136 billion (40% of total support) under measures adopted in the first intention to help SMEs cope with the immediate consequences of the pandemic, against USD 32 billion (4.5% of total support) in stimulus packages.

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