As in most economies, micro, small, andmedium enterprises (MSMEs) in emerging markets are widelybelieved to be the engine of growth across. Over the lastdecade, many researchers and academics have tried to analyzethe issue of MSME access to finance, emphasizing theirdependence on credit and cash flows. This study presents anew approach to the estimation of the unmet demand forfinancing from MSMEs in developing countries. Importantly,it also describes the potential implications for thepublic-sector bodies, private sector financial institutions,and technology providers. The present research addssignificant value to the repository of data in the MSMEspace, and opens new opportunities for furtherinvestigation. It estimates both supply of and demand forMSME finance on a global scale, which has never been done ina comprehensive way. This approach estimates MSMEequilibrium lending in developed economies according to theindustry, age, and size categories, and applies thisbenchmark to MSMEs in developing countries. It estimates theMSME finance gap as the difference between current supplyand potential demand which can potentially be addressed byfinancial institutions. This report is divided into fivesections. The first section reviews the literature aboutfinancing MSMEs. The second section describes themethodology of the present research, data sources, and themodel specification. The third section analyzes the resultsof the finance gap estimation, including regionalcomparisons, formal, and informal MSME sector results, andgender disaggregated statistics. The fourth sectionelaborates on the implications of the finance gap for thepublic sector, including government agencies andmultilateral organizations and lending institutions.Finally, the fifth section highlights implications for theprivate sector, including banks and non-bank financialinstitutions, as well as financial technology companies.
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