Small Firms, large Impact? A systematic review of the SME Finance Literature

Many people in Low- and Middle-Income Countries (LMICs) work for Small and Medium-sized Enterprises (SMEs). Oftentimes, these SMEs have limited access to finance. Interventions to promote financial access for SMEs are therefore an integral part of the development strategy of many governments and donors. To provide an overview of the effectiveness of these interventions, we conduct a systematic review and multivariate meta-analysis. This yields three results. Firstly, few evaluations of SME finance programs apply the same rigorous experimental methods that are more commonly used in studies of microfinance. Secondly, most evaluations of SME finance programs consider neither spillover effects to other enterprises nor effects on the employee level. Thirdly, we find a positive significant effect of SME finance on capital investment, firm performance, and employment within the supported firm, whereas the summary effect on profitability and wages is insignificant. In sum, it remains unclear to what extent SME finance contributes to economic development and poverty reduction. We discuss the main policy implications of these findings as well as the limitations and suggestions for future research on SME finance.