Impact of micro-finance assistance for small and medium enterprises on regional socio-economic development

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An overview of measures of regional disparities is presented, focusing on financial penetration of banking services, levels of household income, unemployment rates, and investments. The role of micro-finance support in fostering small enterprises is examined. A statistical evaluation of the influence of targeted micro-financing on the socio-economic progress of macro-regions, exemplified by federal districts, is conducted. A bibliographical meta-analysis of the contributions of micro-finance to the socio-economic advancement of territories is performed and a regression model for the number of micro-finance aid recipients with the proportion of gross regional product (GRP) investments across federal districts is constructed with correlation analyses executed. The concept of targeted micro-financing for SME is refined, and specific criteria are identified, including: below-market interest rates on microloans, absence of collateral requirements, investment-oriented targeting, focus on startup entrepreneurs and the real economic sector, and positive outcomes for borrowers in terms of economic development. Using official data from the Central Bank of the Russian Federation and the SME, it is revealed that the operations of micro-finance institutions (MFIs) in entrepreneurial financing, both publicly and privately owned, do not entirely align with these criteria. Private MFIs often charge excessively high rates, while public MFIs frequently require collateral and have a limited share of startup entrepreneurs among their clients. A multifaceted (both strong and bidirectional) relationship is observed between the number of micro-finance assistance beneficiaries and indicators of socio-economic territorial development, using federal districts as examples: - an inverse relationship with the share of investments in GRP; - a direct relationship with SME investments in fixed assets. Considering the results of the regression and correlation analyses, a hypothesis is proposed regarding the existence of an intermediary link between SME microfinancing and investments in fixed capital.