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Market Creation for SME Finance Community of Practice

The DCED’s 7 Communities of Practice provide a safe space for continuous sharing of experience on key PSD themes among technical focal points in member agencies. This page covers the work of the Community of Practice on Market Creation for SME Finance. 

Objectives
Current priority themes
Publications
Meeting minutes
DCED webinars on SME finance

The DCED is grounded in the reality that the private sector at large, and SMEs in particular, can thrive and drive positive change when embedded in appropriate support systems. This includes access to finance, business development services (BDS) and functional entrepreneurship ecosystems more broadly. However, it is widely recognised that SMEs in developing economies face significant challenges in accessing finance, particularly in the range of USD 50,000–100,000 up to USD 1–2 million.

This SME finance gap, often referred to as the ‘missing middle’, is not caused by a funding problem but by a collection of system failures that require a coordinated approach. These relate to the financial actors, their practices, instruments and business models; business services; and the regulatory frameworks needed to cost-effectively connect available pools of capital to SME demand. Addressing these systemic constraints in a coordinated fashion is called market creation or market building.

To address these challenges, the DCED established the Community of Practice (CoP) on Market Creation for SME Finance in 2025. The CoP aims to develop good practices for creating markets for SME finance and, in doing so, help address the missing middle. Members include bilateral agencies, foundations, development finance institutions (DFIs), international financial institutions (IFIs), and UN agencies. Together, members share lessons learned, support the development of guidelines and case studies, facilitate research, and foster collaboration and coordination among financial sector stakeholders, private sector development (PSD) practitioners, and finance professionals.

Conceptually, the Community brings together financial sector engagement and market systems development (MSD). Financial sector engagement is typically geared towards mobilising private finance for emerging and frontier markets, using concessional or blended finance instruments and guarantees to achieve development outcomes at acceptable returns. MSD market facilitation supports market actors (in finance, in BDS, or as part of value chains or the public sector) in developing more sustainable models, practices, and linkages with other actors to form more inclusive and adaptive systems. Together, they can build the ‘pumps and pipes’ through which finance can flow to SMEs.

The CoP on Market Creation for SME Finance is co-chaired by the Argidius Foundation and the FMO, the Dutch Entrepreneurial Development Bank.

Current priority themes

In 2026/27, the CoP on Market Creation for SME Finance will focus on the following activities:

  • Developing a primer on market creation: The DCED has supported the development of what has been dubbed the “DCED Market Creation Map”. This map outlines the key dimensions of a coherent system for SME finance, namely: different types of SMEs based on size, stage and growth potential; different types of financial intermediaries (bank/non-bank); business services that increase market transparency, enhance SME investment readiness, reduce risks; regulatory aspects; and (the use of) different financial instruments. The objective of the primer is not to serve as a guideline for an approach, but to create a common understanding of an emerging approach. The primer will translate these into language that both investment officers and PSD practitioners understand. At the same time, it will explain key aspects of systems facilitation techniques in a way that makes sense to both. Finally, the primer will also seek to explain different definitions of impact.
  • Updated BDS guidelines: A key question for market creation is how Business Development Services can best be made accessible to SMEs. This requires a nuanced discussion of who can provide them, at what cost, how to make them as responsive as possible to SME needs, and which SME segments can realistically cover which costs. BDS is neither a service that donors should fully subsidise (reducing Enterprise Support Organisations to training providers) nor a service that can operate fully independently of public support for all types of clientele. The new guidelines will provide a nuanced overview of current BDS practices, incorporating the latest insights and referencing materials that illustrate them. While the new BDS Guidelines are being developed, the old 2001 Guidelines (“Blue Book”) will receive a preface explaining their historical significance. 
  • A ‘demonstration’ system analysis for market creation: While the market creation approach can be explained in theory with the help of a map or a primer, a more practical way of demonstrating why and how to implement it would be through a case study. The CoP will therefore explore the possibility of developing such a demonstration case in the year ahead.

Publications

Publications of the Market Creation for SME Finance CoP are listed below. 

For curated resources on the topic by other organisations, please refer to the DCED knowledge page for SME Finance (forthcoming):

Market Creation for SME Finance knowledge page (coming soon)

Meeting minutes and associated materials

Review the decisions, action items and discussion summaries of the Market Creation for SME Finance CoP below. This includes meeting minutes since its creation in 2025, as well as earlier DCED member exchanges on the topic.

DCED webinars on SME Finance