**Table 3.2 The Continuum of Government SME Services**<sup>37</sup>

|**Type of Service**|**Chile **|**Australia **|**Canada **|**Finland**|**Hol.**|**Ireland**|**Spain**|**Sweden **|**Taiwan **|**UK **|**US**|
|---|---|---|---|---|---|---|---|---|---|---|---|
|**Social**<br>||||||||||||
|Subsidies to<br>unemployed for start-<br>ups|x<sup>a</sup>|x|x|x|x||x|x||x||
|Subsidized interest<br>rates for SMEs|x<sup>b</sup>|||||x||||||
|**Operational**||||||||||||
|State loans or mutual<br>guarantees for SMEs|x<sup>c</sup>||x|x|x||x||x|x|x|
|State banks for SMEs|x<sup>d</sup>||x|||x|||x|||
|Microcredit funds|x<sup>e</sup>||x|x|||x|x|x||x|
|**Transforming**||||||||||||
|Loans to potential high<br>growth SMEs|<br>x<sup>f</sup>||x|x|x|x|||||x|
|Research and dev.<br>loans andgrants|x<sup>g</sup>|x|x|x|x|x|x|x|x|x|x|
|Govt aid to risk capital<br>funds|x<sup>h</sup>|x|x|x|x|x|x|x|x|x|x|
|Fiscal incentives for<br>“angel”, other<br>investors||x|x|||x|x||x|x|x|
|Data bases, “angel”<br>networks|||x|x|x|x|||x|x|x|

Source: Stevenson and Lundström (2002); Crichton, D. (2000).

In 2003, sixteen financial institutions were providing loans through the FOGAPE program. The Government could encourage private banks to develop similar specialized lending platforms for formal micro businesses and SMEs. These platforms would include cost-sensitive client assessment and delivery mechanisms, but would be supported in the early stages by the FOGAPE guarantee. The development of this SME demand-driven product would require a significant amount of technical assistance in the market analysis and product development and testing stages.<sup>38</sup> The Government can also support lengthening the maturity of commercial bank loans to SMEs by purchasing subordinated bonds with a quasi-equity character. The quasi-equity feature would be attractive to commercial banks, allowing them to maximize the leveraging aspects of this arrangement. These bonds could be issued by the participating banks at a premium linked to the channeling of funds to longer-term projects presented by SMEs.<sup>39</sup> In addition, the various government support programs can recognize and support the synergies created by linking guarantees or other financial programs and networks (PROFOs). Banks evaluate favorably those businesses that participate in a PROFO. In the eyes of a commercial bank, participation in such programs clearly represents a reduction in risk. Government support of these links would encourage

> 37 For this Table, the following sources were used: _a) Programa de Reinserción Laboral y Empleo, Línea de Trabajo Independiente_ , by FOSIS (executed US$ 5 million in 2001, equal to 1.7 percent of  of the 2001portfolio; Generación de _Alternativas Laborales para Ex Trabajadores Portuarios_ , by SERCOTEC, represented in 2 percent of the resources and had 500 beneficiaries in 2001. b) INDAP’s loan programs; c) FOGAPE.; d) BancoEstado; e) SERCOTEC’s _Programa para el desarrollo Competitivo de la Microempresa_ (business lines accounted for 1 percent of the resources executed in 2001,with around 7800 beneficiaries); f) Line 1 of CORFO’s FONTEC; g) All lines of CORFO’s FONTEC, CORFO’s Fondo de Desarrollo e Innovacion , and CONICYT’s FONDEF h) CORFO’s FIDES (the funds allocated in this program are equivalent to only 0.3% of the total loan and guarantee support provided by the portfolio as a whole), and ENAMI’s venture capital program for the exploration of mineral reserves (the funds allocated in this program are equivalent to around 60% of the loan support granted by ENAMI; however, it is only 0.35 percent of the total loan and guarantee support provided by the portfolio as a whole)

> 38 These may require two different parametric models: one for formal micros and another for SMEs.

> 39 See Foxley, J. (1998) and Held, G. (1999).

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