U4 Anti-Corruption Resource Centre

This Anti-Corruption Helpdesk brief was produced in response to a query from a U4 Partner Agency. The U4 Helpdesk is operated by Transparency International in collaboration with the U4 Anti-Corruption Resource Centre based at the Chr. Michelsen Institute.

Query

What are the corruption risks specific to the attribution of loans to SMEs and possible mitigation strategies, to the extent that relevant information is available?

Content

1. Corruption risks specific to SME lending
2. Mitigation strategies
3. References
4. Further readings

Summary

Small and medium sized enterprises (SMEs) are driving forces of national economies in many countries of the world. They are a source of innovation and new employment but they face significant challenges to access finance.

Standard corporate credit procedures impose a disproportionate burden on SMEs, mostly due to financial information requirements and high interest rates to limit credit risks. This may encourage them to remain outside of the formal financial sphere or resort to bribery to access loans.

Corruption mitigation strategies, such as internal control mechanisms, four-eye principles, codes of conduct or training, have to take into account standard anticorruption principles. It is important that all actors, banks, SMEs and governments, contribute to fighting corruption in SME lending.

Authors

Sofia Wickberg, Transparency International, tihelpdesk@transparency.org

Date

22/10/2013

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