Capital markets are increasingly developing into much-needed sources of long-term financing for both small businesses and infrastructure construction, suggests a new report from the International Organization of Securities Commissions (IOSCO).

IOSCO Tuesday published a research note that compiles recent examples of capital markets solutions in both developed and emerging markets that are contributing to the financing of small and medium enterprises (SME) and infrastructure projects.

For example, the report highlights Canada’s multi-tiered equity markets, operated by TMX Group, with the Toronto Stock Exchange (TSX) focusing on large and medium-sized issuers, and the TSX Venture Exchange serving as a market for junior issuers. “The junior tier of the multi-tiered exchange structure also serves as a feeder, with a simplified transition to the senior exchange,” it notes.

The report, which was prepared for the G20 finance ministers and central bank governors, details some of the innovative structures and products (including equity, debt and structured products) that represent market solutions to the challenge of financing SMEs and building infrastructure.

“Since the 2008 global financial crisis, the banking sector which has traditionally been a major source of funding for long-term financing (LTF) needs, has undergone a significant deleveraging process. This has increased the gap between supply and demand for long-term financing in many economies around the world,” notes the report. “Against this backdrop of constrained funding, there has been a gradual shift from a pre-dominantly bank-funded model for LTF towards a model that includes a greater share of capital market-based funding.”

Given the increasing role that the capital markets play in providing this sort of funding, IOSCO established its Long-Term Financing Task Force in November 2013 to review the issues and challenges facing this area of the market, and to document opportunities for growth. The task force is co-chaired by Ontario Securities Commission (OSC) chair and IOSCO vice chair, Howard Wetston.

“This research note reflects the important contribution that IOSCO is making in this area, as well as its expertise in terms of the oversight of the capital markets. The note contains concrete and practical capital-markets based solutions that address the increasing demand for long-term financing by SMEs,” Wetston said.

“Given the scale of long-term financing needed globally, particularly for infrastructure development and SME financing, a sound market conduit that can effectively channel funds for economic growth and productivity is of paramount importance. The publication of this research note underscores IOSCO’s commitment to facilitating pragmatic market-based financing solutions,” added task force co-chair, Ranjit Ajit Singh, who is also a vice chair of IOSCO, and serves as chair of the Securities Commission Malaysia.