Teoría Social – Constructivista

1. Differences in the Statistical and Financial Definitions of an SME

The  biggest  challenge  in  building  the  Scoreboard  is  the  lack  of  comparability  across  countries. First, there is the problem of the different statistical definitions of an SME itself.  While ideally it might be preferable to harmonize all statistical definitions across countries,  it is very difficult given their different economic, social, and political concerns. It took the  European Commission many years to arrive at a so-called recommendation for applying  a European Union (EU) SME definition (Box 1). 

Box 1: What is an SME?

There is no single definition of an SME, and employee numbers need not be the sole defining  criterion. However, SMEs are generally considered to be nonsubsidiary firms which employ  less  than  a  given  number  of  employees.  This  number  varies  across  countries.  The  most  frequent upper limit designation of an SME is 250 employees, as in the European Union (EU).  However,  some  countries  set  the  limit  at  200,  while  the  United  States  considers  SMEs  to  include firms with fewer than 500 employees. Small firms are mostly considered to be firms  with fewer than 50 employees while micro enterprises have at most 10, or in some cases five,  employees. Financial assets are also used to define SMEs: in the EU, the turnover of medium- sized firms (50–249 employees) should not exceed €50 million, that of small enterprises (10–49  employees) should not exceed €10 million, and that of micro firms (<10 employees) should not  exceed €2 million. Source: OECD. 2006. The SME Financing Gap (Vol I): Theory and Evidence. Paris. The indicators of the Scoreboard have been developed using a target SME population  which consists of employer firms, i.e., firms with at least one employee other than the 

owner and/or manager.

Another issue linked to the preferred definition of SMEs is the fact that the national statistical  SME definitions differ from that used by banks and financial institutions to collect data on  SME financing. Table 14 illustrates some of the differences between national statistical  SME definitions and those used by financial institutions in the same country.

In  the  final  analysis,  the  diversity  of  national  definitions  was  not  as  important  as  the  difference  in  the  definitions  used  by  the  banks  and  financial  institutions.  They  defined  an  SME  loan  either  by  the  firm  size  or  by  loan  size.  In  the  end,  most  countries  tend  to  converge  towards  a  standardized  definition  based  on  the  same  loan  or  firm  size  classification, with the majority of countries participating in the Scoreboard defining SMEs  as firms with less than 250 employees, which in fact corresponds with the EU definition of  an SME. Banks and other creditors are currently reluctant to switch from reporting based  on authorization levels to reporting based on the number of employees unless required  to  do  so  by  regulators.  Several  reasons  are  advanced  by  financial  institutions  for  not  compiling financial statistics based on firm size, including that they do not collect data by  firm size, the cost of collecting such data is very high, and breaking down loan data by  firm size would jeopardize confidentiality. In those cases, reporting of SME loans is based  on the size of the loan, with SME loans defined as those below the threshold of €1 million  or $1 million, which is used as a proxy.

2. Other Data Problems: Preferred Definitions and Deviations

At the individual country level, the OECD Scoreboard on Financing SMEs and Entrepreneurs  provides a coherent picture of SME access to finance over time and monitors changing  conditions for SME financing and the impact of policies. On the other hand, there are limits to the cross-country comparisons that can be made; this is because of differences  in definition and coverage between countries for many indicators. In a number of cases,  it is not possible to adhere to the preferred definition of the core indicators (Table 15); a 

Table 14: Difference between National Statistical and Financial Definitions of SMEs

Country

National Statistical Definition, Number

of Employees Definition Used by Financial Institutions, Loan Size or Firm Size

Canada Small 1–99; medium-sized 100–499 Size of loan: small <C$500,000 Finland <250 Size of loan, up to €1 million or size of firm France <250 (number of employees  is one of three criteria) Size of firm Italy <250 Firm size; in Bank of Italy statistics, small firms  are defined as limited partnerships, general  partnerships, informal partnerships, de facto 

companies, and sole proprietorships with

fewer than 20 workers

Korea, Rep. of Varies by sector Size of firm

Netherlands <100 Guarantee schemes <250; or < €1 million 

New Zealand <100

Sweden <200  By size of liabilities

Switzerland <250 Size of firm

Thailand < 200 and fixed capital 

<B200 million  Size of firm: sales less than B400 million and size of loan: credit line less than B200 million

United States <500 Size of loan

proxy has been adopted in these instances. For this reason, the Scoreboard data of each  country  are  necessarily  complemented  with  a  table  of  definitions,  which  provides  the  definition adopted for each indicator and the reference to the data source.

A key indicator in this exercise, the SME loans, requires bank data collected by firm size,  or the availability of SME financial statements from tax authorities. Some central banks do  not require any reporting on SME lending so SME loans are estimated from SME balance  sheets. In other cases, credit card debt or personal mortgages are included in SME loans 

and it cannot be determined which part is consumer debt and which is business debt.

When these conditions are not met, business loans below a given threshold (€1 million or  $1 million) serve as a proxy for SME loans. There is also a great deal of variation in how 

banks define nonperforming loans. Some use a cut-off of 90 days, and others a longer 

period. However, if the changes in this ratio are analyzed, the indicator can be used for 

cross-country comparisons.

Government loan guarantees is another indicator where deviations are observed.

Supply-side  data  is  the  best  source  of  information  on  loan  guarantees,  and  sources for such guarantees can be local, regional, or central governments. In some countries,  an  important  volume  of  guarantees  is  also  provided  by  mutual  guarantee  schemes. 

However, the various loan guarantees schemes, public, private, and mixed, are not

always consolidated to obtain national figures. Therefore, the OECD Scoreboard reports 

mostly on government loan guarantees which are readily available. In some cases, lack

of awareness and reporting make it difficult to collect data on guaranteed SME loans. In

fact, SMEs are not always aware that their loan is backed by a government guarantee and banks do not usually report this information.

The indicators on SME loans authorized and SME loans requested  are  obtained  from  demand-side surveys. However, not all countries undertake such a survey, or, if they do,  the results are not comparable. Several countries have information on SME loans used  rather than SME loans requested. In these cases, a proxy is used, which consists of SME  loans  used  divided  by  SME  loans  authorized.  While this  does  not  provide  information  identical to the preferred definition, a decline in the ratio suggests that the credit market is 

easing, or that banks have been providing more credit than is being used.

Significant  differences  exist  across  countries  in  the  calculation  for SME interest rates.

While there is agreement that fees should be included in the cost of the SME loans, it  appears to be particularly difficult to determine which fees, among the various charges applied to firms, to include in the interest rates. 

Central banks usually do not collect key pieces of information on SME access to finance, 

such as the collateral  required  for  SME  loans.  Banks  consider  this  to  be  confidential  information. A rough approximation can be obtained from demand-side information, i.e., the  percentage of SMEs required to provide collateral on new loans. This measure is currently  used in the OECD Scoreboard, and more transparent reporting by banks on the terms of  their SME lending is recommended to improve information on SME credit conditions.

External equity, i.e., venture and growth capital, is usually reported by stage of development:  seed,  start-up,  and  early  expansion  capital.  Later-stage  expansion  capital,  referred  to 

as growth capital, is also reported. Buyouts, turnarounds, and replacement capital are

excluded from venture and growth capital. Country classification systems do not always  break down private equity data into these categories. Most do not break it down by firm 

size. Venture capital data are collected by private venture capital associations, which rely on voluntary reporting and whose membership may be incomplete. There is also no

standard method to value venture capital. There is a need for greater standardization of  venture capital data reporting, in terms of both the definition used for the different stages  of investment, and the methodology employed to collect data.

Payment delays and bankruptcy  data  are  usually  collected  for  all  enterprises  and  not 

broken down by firm size. Since SMEs account for more than 97% of the enterprises  in  the  participating  countries,  the  national  figures  for  payment  delays  and  bankruptcy 

rates are used. However, bankruptcies are hard to compare across countries because

of different bankruptcy costs, legislation, and behavior in the face of bankruptcy. In some 

cases, bankruptcy procedures take a long time and so bankruptcies only show up in later periods rather than during the crisis period.

A much wider and longer-term challenge is the further standardization of SME definitions 

and data in order to obtain indicators that are as comparable as possible both within and

across countries. It has to be said that a lot of progress has been made on that front  since  the  launch  of  the  pilot  OECD  Scoreboard.  However,  international  harmonization  is an ongoing task and full harmonization will require time and collective effort from all  stakeholders.  This  is  in  line  with  the  OECD  Scoreboard’s  objective  of  contributing  to  improving the comparability of the indicators and to an increase in cooperative efforts  among agencies and countries to harmonize their definitions, data collection methods, survey questions, and time frames.