THE economic and social importance of the small and medium enterprise (SME) sector is well recognised globally. It is also acknowledged that these actors in the economy may be under-served, especially in terms of finance. This has led to significant debate on the best methods to serve this sector.
Although there have been numerous schemes and programmes in different economic environments, there are a number of distinctive, recurring approaches to SME finance.
* Collateral-based lending offered by traditional banks and finance companies is usually made up of a combination of asset-based finance, contribution-based finance, and factoring-based finance, using reliable debtors or contracts.
* Information-based lending usually incorporates financial statement lending, credit scoring, and relationship lending.
*Viability-based financing is especially associated with venture capital.
*Reliable for all the small ticket loans. (Source: Wikipedia)

The effective management of lending to SMEs can contribute significantly to the overall growth and profitability of banks. There has been considerable research and analysis into the methods by which banks assess and monitor business loans, manage business financing risks, and price their products – and how these methods might be further developed and improved. There has been particularly intensive scrutiny of the kinds of business financial information that banks use in making lending decisions, and how reliable that information actually is.
Banks have traditionally relied on a combination of documentary sources of information, interviews and visits, and the personal knowledge and expertise of managers in assessing and monitoring business loans. However, when assessing comparatively small and straightforward business credit applications, banks may largely rely on standardised credit scoring techniques (quantifying such things as the characteristics, assets, and cash flows of businesses/owners).
On this note, Finance Minister, Dr Ashni Singh recently raised the level of optimism for the small business sector when he disclosed that government will be implementing new ways in which it can improve access to credit and mobilise the financial sector to contribute to growth and development and poverty reduction.
He said there are other initiatives that can be introduced even in a targeted fashion, without compromising the stability of the sector, since Guyana has long recognised that a strong, stable, well regulated, well managed system is an absolute prerequisite for macro-economic growth and development of the country.
He noted  that the sector has, certainly by most measures, reflected the objectives that government seeks, which is strength and stability and, importantly, striking the desired balance between promoting and fostering and catalysing growth on one hand without compromising prudence and stability.
According to the minister, the local sector has been growing at a most commendable pace and the key indicators have shown same, with the dynamism, particularly growth in credit that has contributed to some of the real expansion seen locally over the last six to 10 years.
Indeed one of the more contentious issues within the business community has been easy access to loans from the banking sector and it is great news to see the government responding in appropriate manner to meet the needs of the small business sector, which is playing an increasing role in the economic development of our country.
The Finance Minister revealed that apart from legislation, such as the recently enacted Credit Reporting Act, the Bank of Guyana is in the process of licensing a credit bureau, which he believes is a conventional instrument to promote access to credit.
This should certainly motivate and encourage small business entrepreneurs or those who are desirous of venturing into the sector.
In this regard, the government should be given full credit for responding to the challenges facing the business community in a most tangible and appropriate manner.