Ads Top

ILO seeks new strategies for SMEs to access loans

INTERNATIONAL Labour Organisation, ILO, has called on policy-makers to look into ways to make it easier for small and medium enterprises,

The labour organisation said enterprises using bank loans as a significant share of their working capital tend to have higher wages and productivity, and lower unit costs, but lamented that SMEs often cannot obtain or afford such financing.

According to ILO, a 10 percentage point larger proportion of bank loans in working capital are associated with 2.2 per cent higher wages, 5.9 per cent higher labour productivity and 3.9 per cent lower unit labour costs. By contrast, the organisation reported that a 10 percentage point larger proportion of internal funds in working capital are associated with wages that are 1.3 per cent lower, labour productivity that is 2.7 per cent lower and unit labour costs that are 1.6 per cent higher.

Deborah Greenfield, ILO Deputy Director-General for Policy, stated: “SMEs play a crucial role in creating jobs, but often lack access to the external funding they need. But in many cases, SMEs cannot get bank loans, or only get credit at comparatively high rates, because they lack audited financial statements, repayment history and business assets for use as collateral.

“Policy-makers need to consider strategies that would help SMEs access such funds, including bank loans for their working capital, which can have strong benefits for both workers and employers.”
Greenfield further noted: “ILO’s World Employment and Social Outlook 2017: Sustainable Enterprises and Jobs , released earlier this month, shows that firms are more likely to make greater use of bank loans for working capital in countries which have stronger creditor rights protection.

No comments:

Powered by Blogger.