Access of micro, small and medium enterprises to financing through the securities markets in Costa Rica

Abstract

Micro, small and medium-sized enterprises (MSME) give life to economies of Latin America and the Caribbean (LAC). They represent 99.5 % of all companies in the region and 60 % of the employed population and are responsible for 25 % of regional gross domestic product (GDP), according to OECD data (Herrera, 2020). This research makes an analysis of the way in which Costa Rica has faced the need to promote access for micro, small and medium enterprises to financing through securities markets, and addresses financial inclusion mechanism that has been historically recognized. It is based on the hypothesis that this financial inclusion of micro, small and medium enterprises to financing through securities markets implies promoting their productivity and competitiveness, through innovation, transfer, and technological adaptation, as well as well as promotion of productive chains of Costa Rican companies. The research showed that is practically impossible for both Costa Rican MSME and SME to be able to comply with all procedures, protocols, requirements and standards that traditional issuers of public offering securities comply with and at the same time request companies presented in a regular and systematic way. Therefore, it was possible to establish existence of multiple reasons why micro, small and medium-sized companies do not frequently use stock market as an alternative to financing. Among them, the main ones are: the fact that they are family businesses and obviously entail an issue of liquidity and availability of financial resources, as well as organizational maturity and a strengthened structure at the business level. Among the main recommendations is the fact of fostering spaces for participatory dialogue with micro, small and medium-sized enterprises, so they can feel accompanied in making financial and managerial decisions. In addition to the above, it will be necessary to urgently consider and especially with the effects generated at the economic level generated by COVID19 pandemic and imminent economic recession that the country has been facing and will face with greater suspicion in coming months or years; the need to make more flexible demands and reduce costs associated with public offerings, recognizing particularities of micro, small and medium-sized companies and, helping them to finance their productive activities through capital market, without affecting investor protection.