Research On The SME Financing Of Mongolia

Importance in the role of SME in the development process continues to be in theforefront of policy debates not only in developing countries but also in developedcountries. The advantages claimed for SME are various, including the encouragementof entrepreneurship; the greater likelihood that SME will utilize labor intensivetechnologies and thus have an immediate impact on employment generation; they canusually be established rapidly and put into operation to produce quick returns; andthey may well become a countervailing force against the economic power of largerenterprises. However, the ability of SME to grow depends highly on their potential toinvest in restructuring, innovation and qualification. All of these investments needcapital and therefore access to finance. Against this background the consistentlyrepeated complaint of SME about their problems regarding access to finance is ahighly relevant constraint that endangers the economic growth of the countries.Mongolia’s transaction to a market economy and the accompanying reform measuresin the financial sector during the past decade have brought about a general policyenvironment and an overall regulatory framework that encourage formal and informalinstitutions to provide financial services to different group of individuals, householdsand organized businesses, including low income segments of the population, micro-enterprises, and small and medium-size businesses in both urban and rural areas. Inspite of the generally fast pace by which access to financial services for SME is beingdeveloped, significant segments of the SME sector do not yet benefit from theexpansion and deepening of outreach. In attempting to gain access to financialservices SME continue to face constraints caused by many common factors.Thus this research intends to study of regulatory and institutional constraints to thefinancing of SME in Mongolia, find out best practices from international experiences,and outlines policy recommendations.