Enhancing the competitiveness of SMEs after thefinancial crisis

Absztrakt

The strengthening of the SME sector is one of the priorities of the Hungarian economic policy. SMEs are responsible not only for creating jobs but also for economic growth by investing in R&D and being involved in exports. Therefore, having access to funds is a basic necessity for them. After a serious setback as a result of the financial crisis and lack of capital, the SME sector began a revival due to incentives taken by the government and the central bank. The paper aims to highlight how governmental policy may intervene into financial markets by providing subsidised credit to SMEs in order to increase their competitiveness. By demonstrating the phases and the results of the Funding for Growth Scheme (FGS) the paper seeks to provide evidence for the justification of institutional support to eliminate market imperfections and stimulate growth. The paper is based on the use and analysis of secondary sources presenting a case study on the reasons for launching the Funding for Growth Scheme, a special type of external debt financing instrument for SMEs initiated by the government and provided by the central bank. Attention is paid to its impact on the volume of corporate lending in the banking sector, as well as, its effects on SMEs’ investments by investigating changes in macroeconomic growth. The paper reveals that the directed loan scheme with favourable interest and a long tenor has largely induced investments in the sector that were previously postponed and increased both firm-level and national competitiveness.