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This paper offers empirical evidence that greater financial inclusion of small and medium enterprises (SMEs) can promote higher economic growth and employment, especially in the Middle East and Central Asia regions. First, we show that countries with higher SME financial inclusion exhibit more effective monetary policy transmission and tax collection. Second, we find substantial employment and labor productivity growth gains at the firm level from access to credit, gains that are higher for SMEs. We also obtain evidence of a substantial positive impact on SME employment and labor productivity growth from improved credit bureau coverage and insolvency regimes. Finally, cross-country aggregate evidence confirms the employment and growth gains from SME financial inclusion, which appear larger in the Middle East and Central Asia than in other regions.

Small business --- Businesses, Small --- Medium-sized business --- Micro-businesses --- Microbusinesses --- Microenterprises --- Small and medium-sized business --- Small and medium-sized enterprises --- Small businesses --- SMEs (Small business) --- Business --- Business enterprises --- Industries --- Finance. --- Size --- Corporate Finance --- Finance: General --- Labor --- Production and Operations Management --- Consumer Economics: Empirical Analysis --- Economic Development: Financial Markets --- Saving and Capital Investment --- Corporate Finance and Governance --- Economic Growth and Aggregate Productivity: Other --- Financial Markets and the Macroeconomy --- Corporate Finance and Governance: General --- Human Capital --- Skills --- Occupational Choice --- Labor Productivity --- Macroeconomics: Production --- Employment --- Unemployment --- Wages --- Intergenerational Income Distribution --- Aggregate Human Capital --- Aggregate Labor Productivity --- Finance --- Ownership & organization of enterprises --- Macroeconomics --- Labour --- income economics --- Financial inclusion --- Small and medium enterprises --- Labor productivity --- Productivity --- Financial markets --- Economic sectors --- Production --- Financial services industry --- Industrial productivity --- Economic theory --- Armenia, Republic of