The devil is in the details: Why SME finance support schemes derail?

Abstract

Based on a review of the research literature, the article identifies and analyzes the “instrumental failures” of four key financial support measures for small and medium-sized enterprises (SMEs) – guarantees, concessional loans, subsidies, and grants. It introduces the concept of an “instrumental failure” and develops a typology of conditions that drive government intervention off course: excessive or insufficient guarantee coverage, undifferentiated fees, overly low concessional rates, disproportionate subsidies and grants, a high share of refinancing, and repeated (“serial”) beneficiaries. The study’s practical significance lies in the specific remedies it proposes for each failure —ranging from an optimal guarantee-coverage band of 50–80 percent to floating fees and quotas for smaller firms —thereby providing a foundation for more precisely calibrated SME-support programs and greater efficiency in public spending.

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