Access to Financing for SME Innovation in APEC

1
Access to Financing for SME Innovation in APEC

• 2008 INSME Annual Meeting
• Guangzhou (Canton), China
• July 2-4, 2008

2
Introduction

• Research objective
• Research framework
• Research approach
• Selection of 10 member economies

3
Research objective
For
Promoting innovative SMEs in APEC
By
Innovating products, processes, marketing and
organizational efficiency of SMEs in APEC
Through
Studying and disseminating SME innovation
policies and best practices in APEC Identifying
coherent environment conducive to SME innovation
4
Research framework
5
Research approach

• Stage 1 literature review in April, 2006
• Stage 2 questionnaire survey in June, 2006
• Mail to 10 member economies
• Stage 3 expert forum in June, 2006
• Preliminary forum with 7 member economies
• Stage 4 interview survey in July, 2006
• Visit to 10 member economies
• Stage 5 final reporting in December, 2006

6
Selection of 10 member economies
7
Financing policy

• Equity financing
• Debt financing
• Financial system stage
• Comparison

8
Financing Policy Framework
9
Equity financing

• Government equity program
• Korea established the fund of funds program in
  2005
• Chinese Taipei initiated the SME Incubation
  Investment Trust Accounts in 2003
• Japan invests into limited partnership for
  venture capital investment
• Malaysia established two venture capital funds in
  2000
• Australia started the Innovation Investment Fund
  program in 1997
• Thailand raised the OSMEP Venture Capital Fund in
  2003
• Indirect equity investment role of investment
  networks through BANs
• Canada and China build networks with angel
  investors and venture capitalists for high tech
  SMEs and start-up firms in incubators
• Mexico installed the SMEs Investor Club
• No equity investment
• Philippines

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Debt financing

• Direct loan program
• Japan provides direct loan through 1) the Japan
  Finance Corporation for Small Business, 2)
  National Life Finance Corporation, and 3) the
  Shoko Chukin bank Japans Credit Guarantee
  Corporations and JASME
• Korea provides policy loans to SMEs Koreas
  Credit Guarantee Fund (1976) and Technology
  Credit Guarantee Fund (1989)
• Malaysia created SME bank in 2005 for financing
  and credit guarantee
• China provide direct loans from the Innovation
  Fund (1999) and from the Funds for SME
  Development (2004)
• Philippines established Small Business
  Corporation (1991)
• Mexico operates the National SME Guarantee
  Program (2001) and Seed Capital Program (2005)
• Credit guarantee program
• Chinese Taipei does not provide direct loan
  programs, but established SME Credit Guarantee
  Fund (1974)
• No direct loan program
• Australia and Canada have market-oriented
  financial systems
• Thailand has no direct loan programs unlike other
  developing member economies and most of Asian
  member economies

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Financial System Stage

• Stock Market Capitalization
• Stock Market Survey
• Whether stock markets provide adequate financing
  to companies. Max is 10.
• Venture Capital Survey
• Whether venture capital easily available for
  business development. Max is 10.
• Source IMD World Competitiveness yearbook

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Stock Market Capitalization (Y2004)
Source IMD World Competitiveness yearbook
13
Stock Market Survey (Y2004)
Whether stock markets provide adequate financing
to companies. Max is 10.
14
Venture Capital Survey (Y2004)
Whether venture capital easily available for
business development. Max is 10.
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Comparison of Financing Policy
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Summary

• Summary

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Summary

• Economies in investment-focused group
• They provide only small proportion for systematic
  direct loan facilities
• These economies do not have special banks nor
  credit guarantee institutions
• They directly involve in creating venture capital
  funds or actively participate in the network
  formation of venture capitalists
• Economies in loan-focused group
• Their financing programs are centered on special
  banks or guarantee institutions
• Recent years, these economies (except the
  Philippines) have created equity investment
  programs targeting high-tech innovative SMEs.
• Japan, Korea, and Chinese Taipei have the longest
  history of governmental loan programs
• Malaysia and the Philippines have relatively
  newly established the public loan systems after
  the Asian crisis

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Find details at the site www.apec-smeic.org, or
e-mail to Joo-Yong KIM at jooykim_at_tipa.or.kr
Thank you!