Translator：Wang Yichun

Introduction

Micro, Small, and Medium Enterprises (MSMEs) dominate the business landscape across all regions. They contribute to approximately 55% of the GDP in developed economies and about 35% in developing ones. On a global scale, MSMEs make up over 90% of all businesses. These enterprises employ nearly two-thirds of the global workforce, with their socio-economic impact being especially pronounced in low-income economies. They offer employment and entrepreneurial avenues for the youth, women, and marginalized groups, including migrants, ethnic minorities, and the disabled, playing a pivotal role in uplifting the income of the world's bottom 40%.  

From September 19-23, 2022, Working Group I (MSMEs) of United Nations Commission on International Trade Law (UNCITRAL) convened for its 38th session in Vienna. Following the New York session in May, Mr Yu Benjun, Senior Partner and Nanjing Branch Leader of Landing Law Offices, was once again invited for online participation.

In 2020, Yu was designated as a specialist for the MSMEs expert group under the China Council for the Promotion of International Trade. Since his appointment, Yu has been instrumental in MSMEs developmental research, with his firm's bespoke legal services for MSMEs garnering widespread acclaim.

This session maintained its focus on MSMEs credit accessibility. In its 2019 fifty-second session, UNCITRAL resolved to offer guidance on this subject and tasked the Secretariat with drafting materials for consideration of the Working Group I. The Working Group I subsequently scrutinized the draft's scope and structure in its 2021 Vienna session and its 2022 New York session. This current session saw the Working Group delve deeper into select topics. 

The accomplishments of Working Group I are designed for countries that either lack a concrete legal framework supporting small businesses in credit acquisition or wish to update their current statutes. The draft's intent is to guide nations in crafting or refreshing their internal legal structures, thus simplifying credit procurement for MSMEs. Additionally, the draft recognizes the adversities many such entities confront due to various crises, including financial, environmental, climate change, or the pandemic. As a result, the draft underscores potential areas for national regulation or legislation and delves into pertinent policies and auxiliary support strategies to amplify the efficacy of these measures.  

Although MSMEs differ in their essence and magnitude, they predominantly exhibit common traits. These encompass a modest scale, a scant or non-existent workforce, constrained capital avenues, challenges in availing bank facilities, limited market reach, scarce chances to employ formal dispute resolution avenues, vulnerability to fiscal hardships, and hurdles in business transition or sale.

In detail, for sole proprietorships or when a business lacks a distinct legal identity, there's often an overlap between personal and business assets. This means that a business downfall can directly jeopardize personal and familial assets. Furthermore, MSMEs often find themselves cornered with scant formal financial services, pushing them towards informal financial channels. From a lender's viewpoint, the expense linked to procuring information for business credibility assessment is steep, with information asymmetry standing as a chief obstacle to external funding.

Working Group I opines that any reform aimed at enhancing MSMEs' credit accessibility should duly factor in these elements. Nations can harness an array of regulatory and legislative instruments to aid MSMEs in their financing quests. To optimize these measures' impact, nations must anchor their strategies in MSMEs' actual scenarios, molding these initiatives to fit MSMEs' legal constructs and balancing financiers' lending risks with MSME protection.