IFC Identifies Weak Credit Infrastructure as Core Barrier to SME Financing
For decades, limited access to finance has been widely cited as the main challenge confronting small businesses. However, the International Finance Corporation (IFC) argues that the underlying problem is more structural, pointing to weak credit systems, slow judicial processes and underdeveloped collateral frameworks as the real barriers preventing businesses from accessing capital.
Speaking on Channel One TV’s The Point of View, IFC Senior Country Manager Kyle Kelhofer said the issue of lending is frequently mischaracterised.
“Access to finance is often treated as the problem, but in reality, it is usually a symptom rather than the root cause,” he stated.
He explained that the lack of robust credit scoring mechanisms, comprehensive collateral registries covering both movable and immovable assets, as well as efficient courts or alternative dispute resolution systems, continues to constrain banks’ willingness to lend and limits the growth potential of businesses.
Kelhofer described collateral registries as critical enablers of credit expansion, noting that they make it possible for individuals and firms to use assets that would otherwise be excluded as security for loans.
“In many parts of the world, when you start a business, you don’t necessarily go to a bank for a loan; you may instead take a second mortgage on your home,” he said.
According to the IFC, closing these structural gaps would significantly lower lending risks, broaden access to credit and release much-needed capital to support small businesses that are vital to economic development.
The development finance institution added that its mandate is largely centred on private sector financing, which allows it to operate with greater flexibility and respond more effectively to investment opportunities, even under difficult economic conditions.
