The DCED is grounded in the reality that the private sector at large, and SMEs in particular, can thrive and drive create positive change when embedded in appropriate support systems. This includes access to finance and business development services. 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”, stems from a lack of market information, appropriate financial instruments, and the institutions and regulatory frameworks needed to deliver them. This SME finance gap, often referred to as the “missing middle”, stems from a combination of market failures that affect both the supply and demand for finance. These include limited market information, inadequate financial instruments, a lack of sustainable business models for reaching underserved SME segments, and insufficient ecosystem support to help SMEs become investment-ready and grow. Weak supporting institutions and regulatory frameworks further limit the mobilisation and deployment of capital at scale.
To address these challenges, the DCED established the Community of Practice (CoP) on Market Creation for SME Finance in 2025. The purpose of the CoP is to contribute to the development of 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 – the former focusing on strengthening financial markets and the supply of finance, and the latter focusing on addressingsystemic constraints, supporting functions and rules to enable SMEs to grow and access finance. Together, these approaches contribute to market creation by developing sustainable business models, strengthening ecosystems, and expanding the pipeline of investable SMEs.
The CoP on Market Creation for SME Finance is co-chaired by the Argidius Foundation and the FMO, the Dutch Entrepreneurial Development Bank.
In 2026/27, the CoP on Market Creation for SME Finance will focus on the following activities:
of a map or a primer, a more practical way of demonstrating why and how to implement is would be through a case study. The CoP will therefore explore the possibility of developing such a demonstration case in the year ahead.