The world economy has been hit severely by the recent credit crunch, the nature of which could only be compared to the Great Depression in 1930s. The recession has a number of consequences, one of which is the difficulty faced by the SMEs in acquiring credit from the banks.
The European Central Bank (ECB) has recently conducted a survey on fiscal matters relating to nearly 6100 SMEs in Europe, and the outcome is alarming, as access to credit is completely closed for most of the companies.
The issue is going to be addressed at the G20 summit this week in Pittsburgh and is expected to raise considerable arguments.
The major point of concern among the G20 leaders would be the amount of reserve’s that the banks should hold in order to fund SME’s.
According to ECB, which is going to conduct the same survey again in six months, it is the bigger and older companies that are going to get the loans as first preference from the banks. For small companies and the public, which are the majority of the loan seekers, the situation will stay unaltered for at least the next six months.
Many governments are getting proactive to tackle the situation, as in Germany for example, where the Government is planning to supply credit worth 18 billion Euros straight to the banks, which they in turn will use to fund SME’s.