75 innovation (Ministry of Science, Technology and Innovation, 2021). A 2006 study of the Non-Reimbursable Funds program of FONTAR found a positive, but insignificant, effect despite its matching grant scheme to assist in financing up to 50% of the cost of technological innovative projects (Chudnovsky et al., 2006). Although the effect of these subsidies did not produce statistically significant results overall, the findings did suggest that subsidies had a significant positive effect on firms that had not previously had innovation expenditures. In addition to grant matching programs like FONTAR, the national government provides a majorityoffinancingforSMEprogramsmanaged through state branches or state-owned banks, including the SePyME (Secretariat for Small and Medium Enterprises and Entrepreneurs), Banco de la Nación Argentina (Bank of the Argentine Nation), Consejo Federal de Inversiones (Federal Investment Council), and Banco de Inversión y Comercio Exterior (Investment and Foreign Trade Bank) (McDermott, 2000). Even though these financing options are available, self-exclusion by small businesses causes underutilization of these programs, thereby signaling a need for more robust communitycentric financing infrastructures. Lastly, on a global level, multiple international organizations including the World Bank, IFC, and IDB, all have contributed billions of dollars to SME projects. Between 2006 and 2012, the World Bank had devoted $9.8B and the IFC had directed approximately $25B in funding to SMEs in Argentina. Recently, due to the COVID-19 pandemic, the IDB had put aside an additional $500M to support small businesses in Argentina (Pauletti et al., 2020). Unfortunately, complicated distribution processes and expensive administrative costs limit the effectiveness of this support. Despite their potential, it is clear that information silos surround these support infrastructures. On one hand, local and municipal organizations that bring together various SMEs in the production chain have the network to connect with each other but not the financing channels that the federal and international organizations are offering. On the other hand, national financing programs and foreign financial support are made available to SMEs but these organizations are unable to reach the network of small businesses they hope to support. Community-based financial institutions, like credit unions or local banks, would close this gap by building bridges to connect small businesses to these opportunities. Creating or expanding these municipal or local infrastructures can connect local alliances, chambers, and partnerships to the various financing options offered and also function as a vehicle to educate small businesses on financing. Due to the limited use of traditional bank loans or credit lines, there is an information disconnect between financial institutions and small business owners. Therefore, community banks and credit unions could provide accessible education on how loans and credit lines work, explain what repayment options and time lines are, provide a network of training and innovation opportunities, and provide support in applying to national and international-based programs. Evidence has shown that these programs have a positive impact on firm performance, employment creation, and labor productivity (Cravo & Piza, 2016). These types of organizations would also work with various government agencies and international organizations in disbursing funds in the form of grants, loans, or credit lines to local SMEs. Through a community-based approach, trust will be built with local banks and credit unions to regain their trust in the country’s financial system, at the same time promoting the expansion and growth of small businesses across the country. Taxation Simplification and Reform As one of the key challenges for Argentina’s SMEs, the complicated taxation structure needs to undergo reform. Although it is difficult for Argentina to continue lowering taxes given its need to generate enough revenue to pay back enormous amounts of government debt, there still are plausible steps the government can take to alleviate the financial burden of taxes on SMEs. The massive informal economy and relatively high tax evasion rates call for a national push for the integration of SMEs into the formal economy.
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