Bank Financing to Small and Medium-Sized Enterprises (SMEs) in Colombia

The Policy Research Working Paper Series disseminates the findings of work in progress to encourage the exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the views of the International Bank for Reconstruction and Development/World Bank and its affiliated organizations, or those of the Executive Directors of the World Bank or the governments they represent.The objective of this paper is to shed light on current trends and policy challenges in the financing of small-and medium-sized enterprises (SMEs) by banks in Colombia. The paper is motivated by the well-documented financing gap for SMEs, whose causes are complex and multi-dimensional. Based on data collection and interviews with the authorities, a representative sample of banks, and other relevant entities, the authors analyze the evolution and characteristics of this market in recent years. Bank financing to SMEs is becoming This paper—a product of the Financial and Private Sector Development Unit, Latin America and the Caribbean Region—is part of a larger effort in the department to shed light on current trends and policy challenges in the financing of small and medium-size enterprises (SMEs) by banks in the region. a strategic segment for Colombian credit institutions. The current business and risk management models for SME lending are still relatively underdeveloped, but greater sophistication is expected as the market matures. Important institutional and policy constraints to SME lending remain, but are not yet binding. In order to address these constraints before they " begin to bite " , the authors identify and describe a potential policy reform agenda. as well as to individuals in all participating private credit institutions, for their significant input in this paper. The helpful comments and suggestions by The purpose of this paper, which forms part of a broader World Bank regional project, is to shed light on current trends and policy challenges in the financing of small-and medium-sized enterprises (SMEs) by banks in Colombia. The paper is motivated by the well-documented financing gap for SMEs, whose causes are complex and multi-dimensional. The topic is particularly pertinent for Colombia, since access to credit has been cited as one of the most important …