Market Creation for SME Finance - Community of Practice (CoP)- DRAFT PAGE

Objectives

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.

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 important to increase market transparency, increase SME investment readiness, reduce risks; regulatory aspects; and (the use of) different financial instruments. The objective of the primer is not serve a guideline to an approach, but cerate a common understanding of an emerging approach. The purpose of the primer will be to translate these into a language that not only investment officers but also PSD practitioners understand. At the same time, key aspects of systems facilitation techniques need to be explained in a way that not only PSD practitioners but also investment officers understand. 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 be best made more accessible to SMEs. This requires a nuanced discussion of who can provide them, at what cost, how these can be made as response as possible to SME needs, and which SME segment can realistically cover which costs. BDS is neither a service that should be fully subsidized by donors  (reducing Enterprise Support Organisations to training providers) nor a service that can operate fully independently from public support for all types of clientele.The purpose of the new guidelines will be to provide a nuanced overview of current BDS practices, incorporating the latest insights
    and referencing materials illustrating this. 
    While the new BDS Guidelines are being developed, the old 2001 Guidelines (“Blue Book”) will receive a preface to explain its historic significance. 
  • 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 is would be through a case study. The CoP will therefore explore the possibility of developing such a demonstration case in the year ahead.

Publications

More information