Public Support for Venture Capital in Emerging Markets: An Overview of Selected Countries

Abstract

It is widely recognized in academic literature that small- and medium-size enterprises (SMEs) struggle with access to finance. Small- and medium-size enterprises are vulnerable, and very few manage to survive more than five years. Public authorities throughout the world, perhaps recognizing both the importance and the frugality of the SME, have created agencies and set up numerous business support and assistance measures to help the sector obtain better access to finance and to encourage business formation. Public intervention in improving access to finance is based on the assumption that significant imperfections exist within the marketplace that preclude the private sector from correcting these market distortions. Such structural government programs are aimed at closing funding gaps, which result when firms from the SME sector are unable to secure necessary capital.