ADB: Lending to large companies rises in South Caucasus amid decline in SME loans

In some countries, such as Armenia and Azerbaijan, the share of loans to small and medium-sized enterprises (SMEs) has gradually declined, coinciding with an expansion of lending to large companies, Shigehiro Shinozaki, Senior Economist at the Asian Development Bank (ADB), said during the presentation in Baku of the Asian Development Bank's Asia Small and Medium-Sized Enterprise Monitor (ASM) 2025 Edition, Report informs.

"SMEs have shaped the market in developing Asia and the Pacific, but it has remained very small, averaging 16.9% of total bank lending, equivalent to 10.7% of national GDP in 2024. On average, 53% of SME loans were allocated to the services sector, followed by industry and agriculture," Shinozaki said.

He noted that most countries in Southeast Asia generally follow this pattern.

"However, sectoral distribution varies significantly by region and country. For example, in South Asia, about 40% of SME loans went to industry. A substantial share of SME loans was directed to agriculture-based enterprises in countries such as Tajikistan, the Solomon Islands, and Kyrgyzstan. Thus, the share of SME loans in total bank lending and national GDP fluctuates widely, depending on exposure to external shocks and government measures," the economist emphasized.

Shinozaki pointed out that between 2020 and 2024, the average share of SME loans in total bank lending decreased in 12 countries, and increased in eight countries.

"For instance, in the Caucasus and Central Asia, overall climate crises were likely linked to economic adaptation driven by growth and state support. Broadly, two trends can be identified. In some countries, like Azerbaijan and Armenia, the share of SME loans gradually declined, coinciding with expanded lending to large companies. In others, such as Uzbekistan, the share of SME loans increased due to enhanced government support through the newly established Business Development Bank," he added.

He also noted that the share of non-performing SME loans fell after the pandemic up to 2023 but began to rise again in 2024 as SME banking markets expanded across the region.

"Thus, the ratio of non-performing SME loans to total SME lending declined after peaking at 8.7% during the pandemic in 2020, stabilizing at 7.0% in 2023. However, in 2024 it rose again to 7.6%. Overall, the share of non-performing SME loans continued to decrease in the Caucasus and Central Asia but increased in South Asia, as well as in Southeast Asia and the Pacific. Regional trends therefore differ significantly," Shinozaki emphasized.