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For a micro, small or medium-sized enterprise (MSME), growth depends on more than obtaining money. Suitable finance can fund a viable plan; management and workforce skills help a business choose, deploy and manage resources; and digitalisation, market conditions and local institutions shape what is possible. Neither a loan nor training guarantees growth.
Why capital alone does not explain MSME growth
Funding can help a business invest, manage working capital or expand, but its value depends on what the firm plans to do and whether it can execute that plan. A business may need stronger financial knowledge to compare offers and plan repayments, management capability to allocate funds, or workforce skills to deliver more or better output. Technology and access to markets can matter too.
The International Labour Organization and OECD identify management and workforce skills, business digitalisation, formalisation and social protection as parts of the productivity environment for MSMEs. Which constraint matters most depends on the sector and local context; a skills gap or financing barrier cannot be considered in isolation. Their report, MSME productivity, inclusive growth and decent work creation, discusses these interacting factors.
The ILO describes MSMEs as “central to the promotion of decent work, economic growth and social justice.” That wider role is one reason to consider not only whether a firm can secure capital, but whether it has the capabilities and operating conditions to use it productively. (ILO, Micro, Small and Medium Enterprises.)
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What recent SME finance data says—and does not say
OECD data show a mixed picture rather than a universal improvement in access to credit. The OECD’s 2026 Scoreboard provides official SME financing data for 48 countries. Its indicators run from 2007 through 2024, with the latest available data for 2025; the figures below describe 2024 unless otherwise noted, not a single 2026 snapshot.
- Median new SME lending increased 5.7% in 2024, but remained 4% below its 2022 level.
- The stock of SME loans as a share of GDP declined in 25 of 41 countries for which that measure was reported.
- Long-term lending edged down.
- Median factoring activity fell 3% in 2024, while leasing rose 1.6%; the equity rebound was uneven.
These are scoreboard medians and cross-country observations, not predictions for an individual firm. A median increase does not mean every country or company saw lending rise. A declining loan-to-GDP share also does not, by itself, explain why the measure fell in each country.
More broadly, the OECD notes that firms need financing sources suited to their life cycle. It identifies bank reliance, information asymmetries, high transaction costs, and insufficient financial skills and knowledge as continuing challenges. Those barriers can affect whether a firm finds a suitable offer—not simply whether finance exists in the market. See the OECD’s SME and Entrepreneurship Financing overview and its topic page on SME financing, business conditions and growth.
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Choose finance by purpose, cash flow and terms
There is no universally best source of finance for every MSME. A firm should compare available instruments against its stage, intended use and ability to bear cost or risk. Debt generally entails repayment, while equity involves a share of ownership; factoring and leasing address different financing needs from a conventional loan. Availability, rules and contract terms vary by country and provider, so this is a decision framework, not a recommendation for a particular product.
| Option | Questions to ask | What to verify locally |
|---|---|---|
| Bank or other debt | What will the money fund? Can projected cash flow cover repayments through a slower-than-expected period? | Interest and fees, repayment schedule, collateral, eligibility, covenants and application burden. |
| Equity | Is sharing ownership appropriate for the business’s growth stage and plans? | Ownership dilution, governance rights, investor expectations, terms and availability. |
| Factoring | Could financing against receivables address a working-capital timing gap? | Fees, recourse or other liability terms, eligible invoices, customer requirements and processing time. |
| Leasing | Is access to equipment more relevant than owning it outright? | Total cost, payment schedule, maintenance responsibilities, end-of-term conditions and eligibility. |
The OECD scoreboard tracks several of these forms of finance, but its cross-country data do not establish which one is cheapest, fastest or most accessible for a particular business. Compare written offers using the same questions: purpose and business stage; total cost and repayment or dilution terms; collateral and eligibility; speed and transaction burden; cash-flow fit and risk; and local availability and regulation.
Identify the capability gap before borrowing or investing
Skills are not a substitute for finance, and finance does not automatically create the skills needed to use it well. A practical first step is to identify the firm’s binding constraint, then decide whether it is primarily a funding gap, a capability gap, or both.
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- Management and financial capability: Can the owner or team assess costs, compare financing terms, forecast cash flow and track how funds are used?
- Workforce capability: Do employees have the skills needed to produce, serve customers or operate planned equipment and systems?
- Digital capability: Can the business use suitable digital tools in ways that support operations, sales or record-keeping? The relevant need will depend on the business and market.
- Operating conditions: Are market access, infrastructure, formalisation or other local conditions likely to constrain the return on new investment?
These questions are diagnostic rather than a universal checklist of prerequisites. A firm should connect any training or technology investment to a specific business need, just as it should connect financing to a defined use and a realistic cash-flow plan.
What the evidence says about finance and jobs
A World Bank blog summarising firm-level research reported that firms with loans had 1–3 percentage points higher employment growth overall across two databases; among MSMEs, the reported difference was 1–4 percentage points. The analysis also examined credit-bureau introductions as a source of variation in credit supply. These are estimates reported in that study summary, not a guarantee that a loan will create jobs or a universal causal effect for every borrower. See Access to finance and job growth (23 May 2016).
The World Bank Group’s Jobs FAQ: MSMEs and Entrepreneurship says an estimated 70% of MSMEs in developing economies lack access to financing. The page does not make the estimate’s base year clear, so it should be read as a broad estimate presented by that source—not as a current, precisely dated rate for every developing economy.
A practical decision sequence for an MSME
- Name the constraint. Specify what is limiting growth now: working capital, productive equipment, skills, digital capability, market access or another condition.
- Define the use and expected result. State what new funds or training would pay for and how the firm will judge whether the investment helped.
- Check execution capacity. Identify management, workforce or digital skills needed to carry out the plan, and address material gaps rather than assuming capital will solve them.
- Test cash-flow resilience. For debt or other fixed commitments, assess whether projected cash flow can support payments if sales or implementation take longer than expected.
- Compare local options and written terms. Confirm eligibility, total cost, collateral, timing, regulation and any ownership or contractual consequences with locally available providers.
For guidance on broader financing conditions and SME growth, the OECD maintains a topic resource on SME financing, business conditions and growth. Actual eligibility and offer terms still need to be checked in the firm’s own country and circumstances.
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