2.8. The "Missing Middle" in Financing
Medium- and long-term financing is hard to come by for all but the more established, larger enterprises. While the expansion of microfinance has begun to serve low-income households and microenterprises, the very poor continue to be underserved. Smaller and medium-sized enterprises (SMEs) tend to be too large to be served by microfinance institutions and yet too small and high-risk to be attractive to the formal banking sector, resulting in what has been termed the “missing middle.”
This has significant development consequences because the majority of economic growth, and employment is created by small and medium enterprises. Thus, their difficulty in accessing finance constrains overall economic growth.