AFI members from 24 countries were in Ulaanbaatar last week to take part in the 6th meeting of the SME Finance Working Group (SMEFWG) from 23-26 May. Hosted by the Financial Regulatory Commission of Mongolia (FRC), the meeting included representatives from across Asia, Latin America, Eastern Europe, Central Asia and the Pacific. High-level participants at the event included the deputy governor of Banco Central de Timor-Leste, Nur Alkatiri, Acting Chair of the FRC, Batbold Erdenebileg, and AFI Executive Director Alfred Hannig.

In his opening statement, Acting FRC Chair Erdenebileg expressed gratitude to the participants for their attendance and welcomed the opportunity to learn and to share SME finance experiences from such a diverse gathering. He highlighted FRC’s recent Maya Commitment, made in cooperation with the Ministry of Finance and the Bank of Mongolia, to implement the ‘Financial Market Strategy 2025’ in which SME finance would play a fundamental role.

Mr. Hannig praised Mongolia and the FRC for its dedication to financial inclusion and its leadership within a fast growing region of the AFI network. He also noted how SME finance was quickly becoming a priority both within and outside of the network. “With the incorporation of SME finance into the Maya Declaration, our network now has a clear mandate to ensure this pillar of inclusion is given the resources and the attention it needs. It is the SMEFWG who will be the stewards of this effort.”

SMEFWG had a busy agenda focused on planning and finalizing its knowledge products. In the group’s meeting it was first decided that a case study to explore the gender dimension of MSME finance should be developed. Bangladesh Bank and the Microcredit Regulatory Authority of Bangladesh will be in charge of developing this task.

SMEFWG agreed to revise the SME finance basic terminology and, because of the significant changes which have taken place in the field, participants decided to develop a new SME finance definition glossary publication. This knowledge product will showcase the criteria used by policymakers, and explain the rationale behind choosing such criteria. Work on this product has already begun, with an initial survey conducted in 24 countries. The SME finance definition glossary is expected to be completed by the end of 2016.

Finally, the group decided to consolidate two previously published guidelines, the Role of Regulator on SME Finance and the SME Finance Policy Catalogue into a single publication “The SME Finance Policy Catalogue and the Role of Regulator”. The group aims to have this work published and presented by Fiji GPF in September, 2016.

After participating in breakout sessions on AgriFinance, Digital Payments, Crowd Funding, Gender and Financial Stability, the group identified priority areas with a potential to have a significant impact on SME finance. Further research will be done with a goal of producing a series of SMEFWG products on new trends during 2017 and 2018.

The meeting was also an opportunity to hear about the progress and activities underway in Mongolia, and in particular the FRC’s commitment to expanding access to financial services, literacy and consumer empowerment. FRC presented its experience with SME Finance through guarantee funds and spoke on the benefits it has seen with AgriFinance projects. The challenges that Mongolia still faces were articulated by Ms. Munkhzul from the Golomt Bank of Mongolia who said, “The top three issues I see for SME’s in Mongolia are the establishment of an enabling clear legal environment, easier access to loans and banking products, and much better and much more transparent data.”

AFI member institutions from the Philippines,  India, and Mexico provided interesting presentations on AgiFinance, digital payments and the financial inclusion value chain giving participants an opportunity to hear views from different regions of the globe. These sessions also benefited by the presence, via WebEx conference, of private sector leaders, including AFI’s PPD partner Mastercard, and financial inclusion knowledge partners Global Banking Alliance (GBA), and the International Finance Corporation (IFC).

Participants considered how the recent addition of the Maputo Accord, which made SME Finance a key indicator of the Maya Declaration, could be utilized to advance their work. It was noted that 29 institutions had indicated an interest in making an SME Finance commitment under the Maya Declaration, but so far only seven had made public declarations. While there was an understanding that new targets take time to properly develop, the group agreed to look for ways and opportunities to support the establishment of more SME finance related commitments. Bank Negara Malaysia representative Ms. Kasim argued strongly on the value that SME Finance targets could bring to the Maya process and highlighted her own institutions experience in this area.

The discussion then turned to the upcoming AFI Global Policy Forum and how that meeting would be an opportunity to highlight AFI members who had made SME finance commitments, as well as a providing a stage for the announcement of new commitments.

In her closing remarks, SMEFWG Chair, Yunita Resmi Sari gave thanks to all the participants for their work during the sessions and for their presence in Mongolia. “the topics we have discussed this week have been interesting and important for the future of this working group and for SME Finance policy. We have made tremendous progress and I am looking forward to showcasing our work to the entire AFI network at the GPF in Fiji this September.”