The World Federation of Exchanges publishes joint report with Milken Institute on SME Exchanges

London, 18 July 2017 – The World Federation of Exchanges ("WFE"), which represents more than 200 market infrastructure providers including exchanges and CCPs, today jointly published a report with the Milken Institute on Small and Medium-sized Enterprises ("SMEs") and SME exchanges. The report consolidates results from initial independent research from the WFE and the Milken Institute published earlier this year.

The joint report analyses survey responses from listed and unlisted SMES from Canada, China, India, Jamaica and South Africa to assess the effectiveness of SME exchanges specifically in meeting the financial and other listing motives of SMEs.

The primary findings of the report can be summarised as follows:

• For the surveyed companies, stock exchanges are performing the very important function of providing SMEs with access to cost-effective finance. Indeed, 60% of firms said, "raising capital at lower cost" was an important reason for listing, and 76% of surveyed firms cited the lower cost of capital as their reason for raising public equity, rather than other types of capital.
• In addition to finance-related matters, SMEs also listed to position the firm for growth; to enhance brand and reputation; and to diversify the investor base.
• In response to a survey question about whether firms would list again, 74% said they would, demonstrating the positive experience of being listed.
• The report also highlights areas where the company experience of being listed was worse than expected. These include time and costs of aligning financial record keeping and reporting with listings requirements, and meeting ongoing listings requirements.
• Among unlisted firms, the reasons for not listing varied across the different countries, ranging from concerns about the cost of listing, and meeting regulatory requirements, to not knowing enough about listing to make a decision.
• Two key factors were identified that could make listing more accessible: containing costs; and improving firms' ability to understand and meet the listings requirements.

Nandini Sukumar, CEO, WFE said: "Our joint research suggests that stock exchanges can contribute positively to SME growth. This is particularly important as SMEs play such a vital role in generating economic growth, particularly in developing countries where SMEs are instrumental in creating jobs, building thriving private sectors, and diversifying economies."

Staci Warden, Executive Director, Center for Financial Markets, Milken Institute said: "Given the importance of SMEs for job creation and economic growth, expanding access to finance for these businesses is one of the most fundamental issues for inclusive economic development. The collaborative research work of the Milken Institute and the WFE helps us better understand the role equity markets can play for funding at least some SMEs with high-growth potential."

Siobhan Cleary, Head of Research & Public Policy, WFE added: "Increasing numbers of WFE members across developed and emerging markets are actively seeking innovative solutions to SME financing challenges. To this end, we are seeing everything from new SME markets, to venture platforms and crowdfunding aggregators."

The WFE's SME Working Group has 21 member exchanges from across all WFE geographies. Its ongoing mandate is to identify critical success factors for SME markets. The WFE publishes SME market statistics annually as part of the WFE Annual Statistics Guide, the most recent of which can be found here. You can also read the WFE's report from February 2017 into exchanged-based financing of SMEs by clicking here.

Click here to read the WFE & Milken Institute SME report in full. 

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