An assessment of demand for and access to financial and especially credit services by enterprises relies on financial information from firms and on surveys and anecdotal evidence from financial institutions, banks, and other market participants. While data on listed companies are often readily available, few developing countries have consistent databases on SMEs. Ideally, corporate data should be combined with bank data to assess both the different sectoral and business line focus of banks and the competitiveness of the banking market (e. g., by considering the number of bank relationships per firm). Such analysis should also be informed by the available data on infrastructure, especially about the legal system and the information environment. The available data could reveal that certain products, such as leasing or factoring, do not constitute valid financing options for enterprises. Factors behind such missing markets would have to be examined.
When one considers financing patterns, in addition to bank or equity finance, it is also important to focus on trade finance, which is an important financing source, espe-
dally for small firms. Trade credit can be both a substitute to and a complement for other external financing sources. Trade credit might vary systematically across size groups, with one group being a net creditor or debtor relative to others. For example, if the small firm group is a net debtor in trade credit, this debtor position might indicate a trickle-down effect, with large firms effectively passing on bank credit to small firms through the trade credit channel. Moreover, many developing countries and emerging markets rely on bank-financed trade credits to support exports at preshipment and postshipment stages, as well as imports. Such financing provided by international banks tend to be channeled to local borrowers through domestic banks and to constitute an important source of working capital.
Development, directed credit, or both might be another important source for certain enterprise groups in many developing countries. While it is typically beyond the scope of a financial sector assessment to produce a detailed cost-benefit analysis of the effectiveness of such programs, an indication of whether those programs reach the target groups and whether they have complementary or crowding-out effects might be interesting.
If appropriate data are available, testing for financing constraints among firms can be an interesting complement (see box 4.5). A further step would be to link firm characteristics, such as size, sector, and profitability, to financing constraints so one can compare access to finance across different firm groups and can test for potential segmentation in the market.