SME Equity Gap
A persistent lack of equity in the small and medium enterprise (SME) sector — also referred to as the ‘SME equity gap’ or ‘SME access-to-finance gap’ — is the most pressing issue in the Central and Eastern Europe (CEE). The region is critically lacking the right level and type of financial resources: bank financing is typically unavailable to the region’s SMEs and only 35% of European resources for social enterprises (SE) are spent in CEE. Venture philanthropy investment level in the CEE region is 65 times lower than in Western Europe while SE and impact intermediaries source more than 75% of their budgets from donors, a form of financing that often excludes early-stage financing. All this stifles the growth of the region’s key sectors and serves as a major barrier to proliferation of region’s startups and scaling of the its SMEs in the key digital economy sectors.
Steering the regional economies towards the digital frontier requires new sources of intelligent capital and patient financing for the region’s small and medium enterprises (SME) and social enterprises (SE) in its impact arena. Funding opportunities for the startups in most of the CEE region are very limited, and in many areas altogether non-existent. In more developed ecosystems, public funding serves to bridge the gap, but with the CEE countries’ fiscal constraints and policies this approach has so far…
