Major reforms and public sector effortsin recent years have focused on improving conditions forincreased private sector financing. However, and despitenumerous financial institutions operating in the market,financial services penetration remains low. While muchprogress has been made, challenges remain in terms ofaffordability and ease of access to finance. Banks are amajor source of funding to the private sector and small andmedium enterprise (SMEs) in particular, with highlystandardized credit products. Other Financial Institutions(OFIs) face a number of growth and market developmentchallenges to effectively serve the lower end of the SMEsegment, including funding difficulties and institutionalcapacity. The government plays a critical role through thedevelopment banks in promoting credit to SMEs throughguarantees and second tier finance programs. The legalframework for immovable collateral (real estate) is affectedby high origination costs and lengthy enforcementprocedures. The legal framework for movable collateral(equipment, inventory, accounts receivables, and cash) hasbeen modernized. Challenges remain to unify the legalframework and address enforcement delays.
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