Small and medium enterprise financing and the structural barriers to credit accessibility in the formal banking systems of developing nations

Small and medium enterprises (SMEs) form the economic backbone of developing nations, absorbing the bulk of employment, driving entrepreneurial activity, and contributing substantially to national output. Yet persistent and deeply rooted barriers prevent the majority of these enterprises from accessing credit through formal banking channels. This review examines the structural, institutional, informational, and macroeconomic dimensions of this problem, drawing on evidence from Sub-Saharan Africa, South and Southeast Asia, Latin America, and the Middle East and North Africa. It interrogates how asymmetric information, collateral requirements, regulatory design, banking sector concentration, and macroeconomic volatility together create a financing environment that systematically works against SMEs. The review also assesses emerging responses from development finance and credit guarantee schemes to fintech-driven lending models evaluating what these approaches can and cannot achieve. It concludes with a research and policy agenda aimed at making formal financial systems genuinely accessible to the enterprises that need them most.