Presented at the Regional Meeting on SME, Entrepreneurship and Access to Finance Indicators, organised by the OECD-MENA Investment Initiative, December 2011. http://www.oecd.org/mena/investment

1. THE SME POLICY INDEX
Antonio Fanelli
Deputy Head
Private Sector Development Division
Organisation for Economic Cooperation and Development (OECD)

2. Content of the presentation
1. Introduction
2. The OECD Private Sector Development Division
• The SME Policy work conducted by the OECD- PSD
2. The SME Policy Index
• Structure, objectives and evolution
• Policy approach and Methodology
• Applications
3. The SME Policy index process, how it could be applied to
the GCC countries
• Scope, structure and assessment process options
• Partners and stakeholders
• Time –frame
4. Conclusions

3. 1. Introduction

4. The OECD Private Sector Development Division (PSD)
• The PSD’s mandate is to assist OECD non member countries to
design and implement policies aiming at improving the
investment climate and the operational conditions for private
sector enterprises.
• It a relatively new division, set up in 2007, as part of the effort
of the OECD to engage more with emerging and fast developing
economies;
• The PSD activities are organised around regional programmes;

5. PSD Regional programmes
Regions
Countries
Main areas of work
Western Balkans,
Romania, Bulgaria and
Turkey
FDI
SME
Innovation and Human
capital
Trade and investment
Middle East and North Africa
(MENA)
Magreb, Mashred and the
Gulf
FDI
SME
Governance and
regulatory reform
Women entrepreneurship
Private Public Partnership
Eastern Europe and South
Caucasus
(Eastern Partnership)
Ukraine, Belarus, Moldava,
Georgia, Armenia,
Azerbaijan
SME
FDI
Sector Competitiveness
Central Asia
All former SU Republics
excluding the Russian
Federation
Sector Competitiveness
FDI
South East Europe
(SEE)

6. The OECD PSD approach to policy design and policy
implementation
• Work is organised around regional forums where
governments can compare policy experiences, seeks
answers to common problems , identify good practices
and coordinate policies;
• The approach is participative, promoting dialogue among
policymakers and with the key policy stakeholders:
representatives of private sectors, experts, civil society;
• The objective is to build long lasting partnerships with
government institutions, research organisations, other
international organisations.

7. OECD PSD work on SME policy
Main activities:
 Policy analysis and policy review, at country or regional
level;
 Analytical work on key SME policy topics or instruments,
resulting in the publication of reports and working papers:
for MENA a working paper on Credit Guarantee Schemes
and the forthcoming report on Young Enterprises;
 Organisation of regional policy forums and conferences:
i.e the MENA the Working Group on SMEs,
Entrepreneurship and Human Capital Development;
 Unique tool for cross country SME policy analysis: the
SME Policy Index

8. The SME Policy Index
• An analytical and dynamic tool to review SME Policy
developments on a number of policy dimension and across
countries;
• A process, by which a group of countries sharing common policy
goals agree on developing a joint framework for monitoring and
comparing SME policy developments;
• A framework to exchange experiences, good practices and
foster policy dialogue;

9. Evolution of the SME Policy Index
• Designed and tested first for the Western Balkans in 2006
• Refined and adjusted since then:
 3rd cycle of regional policy assessment in the Western Balkans and
Turkey: 8 countries –currently under way, to be complete in 1stQ
2012;
 1st assessment : North Africa and Middle East (2008), 9 countries;
 1st cycle of region policy assessment in the Eastern Partnership
countries (Armenia, Azerbaijan, Belarus, Georgia, Moldova and
Ukraine) – currently under way to be finalised in 1st Q 2012;
 Country-specific assessments finalised in Egypt, Morocco, and
Moldova, Sub-national assessment in Serbia (2009), Western Balkans
(2012).
• Adopted by ASEAN in November 2011 to foster cooperation in the SME
policy area

10. 2. The SME Policy Index

11. The policy approach
The Policy Index is based on the view that SME
Policy consists of two main components:
- A horizontal policy component focusing on the
improvement of the business climate for all
enterprises
- A Small Business component, covering the public
policy initiatives targeting specific segments of the
small enterprise population

12. The policy approach
• Examples of horizontal policy actions: simplification of
company registration procedures; general tax regime and
administration improvements, general labour market
reforms, etc.
• Examples of target interventions: support to start-ups,
provision of business support services for young
entrepreneurs; financial schemes supporting small
enterprises in deprived areas.
The optimal mix between the two components depends on
the specific country situation, on the level of institutional
development and the country resources

13. The policy approach
• Targeted policy interventions are the public policy response
to market failures and coordination failures;
• Under this view, the primarily objective of public policy is to
improve the general business climate. The second objective
is to intervene in case of clearly identified failures;
• The SME Policy Index includes indicators that cover both
the horizontal components as well as the targeted actions;
• Emphasis on strategy elaboration, public private
consultation and policy evaluation, in order to be sure that
the government action is based on solid arguments:
evidence based policy.

14. The policy approach
Other key dimensions of SME Policy:
 National versus sub-national: policy delivery is mostly done
at local level;
 Horizontal versus sectorial policy: SME Policy may be
integrated into the national development/industrial policy;
 Competition dimension: SME promotion is an integral
element of competition policy, aiming at diversifying the
economy and putting pressure on the incumbents;
 Gender dimension: entrepreneurship as a tool for women
empowerment.

15. The policy approach
A comprehensive SME Policy Assessment has to include :
• an evaluation of the business climate policy measures that
are particularly relevant for SMEs;
• As well an evaluation of the quality and effectiveness of
targeted measures;
The first is achievable by combining business climate
indicators, such those of Doing Business with specifically
designed indicators;
The second is more complex and in a cross country exercise
can be applied only to priority measures.

16. Key components of the SME Policy Index
The Policy Framework:
A policy document endorsed by all the participating
countries stating the broad objectives and defining the
scope of the joint policy initiative
Example: in the EU the Small Enterprise Charter and the
Small Business Act;
Same policy framework for the Western Balkans and
Turkey;
The Enterprise Charter for North Africa and the Middle
East
Is there an equivalent for the GCC countries?

17. Key component of the SME Policy Index
The assessment grid:
A set of policy indicators derived from the Charter ,
organised by dimensions (broad policy areas: such as
innovation, access to finance, etc) and sub-dimensions,
specific policy areas
The policy progression:
A systems policy development steps, capturing the main
features associated with a specific policy development
status and defining the path of convergence towards
shared objectives and the incorporation of recognised
good practices

18. The Western Balkans
The SME Policy Index methodology
SME Policy Index
Dimensions (SBA)
1. Rewarding entrepreneurship and
thriving family business
2. “Second chance” Bankruptcy rules
3. “Think Small First” principle
4. Responsive public administration
5. Adapted Public procurement and
State Aid
6. Timely payments in commercial
transactions/Access to Finance
7. Benefitting from a Single Market
8. Skills Upgrading and innovation
9. Environment and SMEs
10.SMEs and access to markets

19. Indicators and policy steps
The indicators:
They must be relevant and measurable> aim of what is
observable and verifiable, not what is optimal;
Participants should be involved in the design of the
indicators, they must share a common view;
Not too general, but not too detailed, a difficult exercise
of balancing;
The policy steps:
Must be calibrated on the policy development spectrum;
Must have a consistent time horizon, if the process will
last 5 years a country must be able to move from bottom
to top within the agreed time-framework.

20. Statistical Indicators
The statistical indicators:
SME Policy Index indicators mostly qualitative;
Need to integrate them with statistical indicators about
structure and dynamic of the SME population and its
contribution to the economy:
Sources: National economic statistics, company survey
conducted by international and national organisations
(UN, GEM), other relevant surveys (i.e. labour force,
innovation surveys);
Issues with different SME definition, reference base and
methodology.

21. Actors in the SME Policy Index
• The Country SME Policy Coordinators:
Senior SME Policy officials in charge of coordinating the country
participation to the process and the collection of the inputs for the
assessment grid and steering the regional policy dialogue process;
• The partner Organisations: multilateral and bilateral organisations
providing advice and assistance through the process: the OECD has
been working with three other International Organisations;
• The SME Community: business associations, experts, academics,
Chamber of Commerce, donors;

22. The Western Balkans
The SME Policy Index is organised
to involve all levels in the evaluation and input process
EC, OECD, EBRD, ETF Core Team
collects data and interviews and
establish a preliminary level of
progress for each country in each
policy dimension
 Local consultants build from the
first measurement by collecting
primary data in the countries and
conducting interviews with local
experts. The results analysed by the
Core Team and incorporated into
the level of progress
 The Private Sector and the National
SBA Coordinator’s Team conduct
separate evaluation. This provides
an opportunity to step back and
analyse the measurements in a
broader context. After consultation
mechanisms are complete, all
parties confirm a final
measurement.

Local Consultants
Country Economic Team
EC ,
OECD,
EBRD,
ETF Core
Team
Private Sector
EC/OECD Experts
Local Experts

23. Case study: the Western Balkans
Overall objective:
• Improving the business environment for SMEs in the Western
Balkans + Turkey, set against the Copenhagen economic criteria
through a comprehensive and comparative assessment of the
implementation of the Small Business Act (SBA).
Specific objectives:
• Providing a monitoring assessment of the progress made in the ten
policy principles covered by the SBA
• Promoting the exchange of experiences in policy elaboration and
implementation among the pre-accession economies and the OECD
countries, through regional meetings
• Facilitating policy dialogue and programme co-ordination
• Promoting the adoption of good practices

24. Deliverables
The Western Balkans
• Development of a new monitoring tool for SME policy, based on
the SBA
• SME stakeholder meetings in every partner economy to discuss
and validate the assessment results
• Publication of a regional report on the implementation of the SBA,
including regional and country-specific policy recommendations
• Monitoring of specific policy measures / priorities and workshops
to coach the partner economies how to measure the impact of
specific SME policy measures [see end of presentation].

25. Access to finance indicators
The Western Balkans
Sources of external finance
for SMEs
Legal and regulatory
framework
Other factors that affect
demand and supply of
finance
Credit guarantee schemes
Cadastre
Financial literacy
Public start-up funding
Credit information
services
Business Angels network
Registration systems for
moveable assets
Microfinance Facilities
(including Credit Unions)
Collateral and
provisioning
requirements
Availability of
Risk Capital (e.g. venture
capital, private equity funds)
Creditor rights
Leasing
Access to stock market

26. Strengths and Limitations of the Approach
The Western Balkans
Strengths:
• Participatory, flexible and adaptable to various policy
processes, institutional settings, and regional group
configurations
• Complimentary to other sets of policy indicators e.g. WB
Doing Business, EBRD Transition Reports…
• Built with input from international financial institutions
Core
(EBRD, EIB,ICEC)
Team
• Complementary to the OECD Scoreboard
Weaknesses:
• Difficult balance between qualitative and quantitative inputs
• Measurement problems with implementation phase (levels 4
and 5)

27. Organisation
The Western Balkans
• The project is jointly implemented by the OECD, the EC, the
European Training Foundation (ETF), and the EBRD;
• Each organisation is in charge of the SBA areas it has the most
expertise in (e.g. ETF: human capital; EBRD: access to finance);
• Co-operated with the OECD Centre for Tax Policy and
Administration on the SBA dimension of SME taxation;
• Close co-operation with the OECD Centre for Entrepreneurship
on the assessment of Turkey.
• Consultation also with the South East Europe Centre for
Entrepreneurship Learning (SEECEL)

28. The Western Balkans
Timeline
April 2011: Launch of the project
April 2011 – September 2011: Tripartite assessment:
i.
ii.
iii.
Local consultants’ independent assessment with focus on private sector
Desk research by partner organisations
Self-assessment by Western Balkan governments
October – November 2011: Country stakeholder meetings to compare
assessments
November 2011: Regional meeting to finalise assessment scores
March 2012: Publication of regional report

29. Example of Output (I)
The Western Balkans
SME Policy Index 2009 Regional Report:
- 300 page regional report on the
implementation of the SBA in the Western
Balkans
- Analysis and scoring of over 70 policy
indicators across the region including a
comparison between 2007 and 2009
- Regional and country-specific policy recommendations
- Special section on policies to support high growth SMEs
- Report launching at high-level conference including European
Commission Vice President and five Western Balkan Ministers.

30. Example of Output (II): progress in scoring
between 2007 and 2009 regional reports
The Western Balkans

31. Score
Example of Output (III):
SME Policy Index scores for Serbia in 2009
The Western Balkans

32. 3. The SME Policy index process, how it could
be applied to the GCC countries

33. Building a GCC SME Policy Cooperation Process
Few advices based on the OECD experience:
 The preparatory phase is critical for the success of the initiative:
 The participants must take an active participation in the definition
of the policy framework;
 Make sure that all relevant policy dimensions are covered and
properly developed (for instance policy to reduce the relevance of
the informal economy may not be initially considered, but may be
very relevant for some GCC economies;
 Country experts should contribute to the design of the policy
indicators and the policy steps;

34. Building the GCC Policy Index
 Select a set of policy dimensions that are of high relevance for all
the participating countries;
 Identify a group of experts from the GCC countries who should
contribute to the design of the policy indicators and the policy
steps;
 Define a set of milestones in the assessment process and secure
political support for each key milestones, by reporting regularly to
ministerial meetings;
 Secure the support and direct involvement of international
organisations to contribute to objectivity of the process and the
validation of the methodology;
 Make the process as participatory and transparent as possible,
using web-information, by inviting inputs from stakeholders and
conduct open consultation meetings.

35. 4. Conclusions

36. CONCLUSIONS
• The SME Policy Index has proven to be a flexible and
effective tool for fostering regional cooperation and for
supporting national SME policy development;
• It is a tool that can be adapted to different international
and regional contexts and various levels of economic
development;
• It is a highly interactive process that involves the
participation of the partner countries at all stages of
project;

37. CONCLUSIONS
• The previous applications have shown that the
assessment process can generate positive synergies,
inside each country, by improving the level of intra—
government communication and at cross=country level,
by put in motion a peer to peer process of exchange of
experiences
• The OECD is ready to assist the GCC countries in
developing their own SME Policy Index, including
elements from the Score Board and the Entrepreneurship
Indicators.

38. Thank you.
Antonio Fanelli
Antonio.Fanelli@oecd.org
Deputy Head of Division
Private Sector Development
Directorate for Financial and Enterprise Affairs
Organisation for Economic Co-operation and Development (OECD)

39. Steps of SME Policy Implementation
Step 1 – Key elements of project implementation and monitoring
mechanisms are already defined at the time when the SME
supporting measures are approved:
 Objective(s) of the measure;
 Targeted enterprises;
 Eligibility criteria;
 Budget;
 Timeline;
 Implementation agency;
 Delivery and monitoring system;

40. Steps of SME Policy Implementation
• Step 2 – Quantitative monitoring of delivery over time: statistics about
the number of applications, applications processed and approved and
assistance delivery, funds allocation;
• Step 3 – Qualitative monitoring of delivery over time: checking if actual
delivery matches eligibility criteria and targeted enterprises: data and
information on application processing and approvals;
• Step 4 – Review of the implementation record after the first phase of
implementation to control that implementation goes according to
initial plans and to check if adjustments are needed. Stakeholders and
representatives of the beneficiaries should be involved in the review;

41. Steps of SME Policy Implementation
• Step 5 – Impact evaluation: the responsible agency/ministry
commissions to an independent party an impact study, according to a
pre-defined methodology (see OECD Framework for the Evaluation of
SME and Entrepreneurship Policies and Programmes);
• Step 6 – Review of the impact evaluation results with the participation
of stakeholders, distillation of lessons learned, inclusion of lessons
learned in to the policy making process.