ACCA - The global body for professional accountants

Access to finance

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ACCA produces research and thought leadership on a wide range of diverse topics, from micro-finance to the capital markets.

Underlying all of our thinking on these diverse topics is a single conceptual framework, developed in the process of answering a simple question: how does financial intermediation create public value?


Financial institutions and intermediaries create value by making it possible for businesses to undertake profitable projects that would otherwise never happen, using funds from investors who in return get a better risk-adjusted return than they would elsewhere. This is achieved by combining four Intermediate Inputs: Information, Control, Collateral, and Risk. The Four Inputs are called ‘intermediate’ because they too have to be produced from simpler raw materials such as labour and capital. Hence the broad term ‘financial technology’ can sometimes be used to describe both the way in which the Four Inputs are combined and the way in which they are produced.

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Information includes any information that can be used to infer the risk or returns involved in a project in need of financing. This can be financial or non-financial, ‘hard’ or ‘soft’, highly structured or unstructured, internally generated or bought-in. It can be embedded in risk or valuation models, or sifted from rumour and word-of-mouth.

Control includes any ownership or governance structure, management or financial controls, or contractual arrangements, which allow the lender or investor to directly or indirectly influence the behaviour of the businesses they finance. This can range from a direct stake in the business, to board membership, loan covenants or management incentives.

Collateral includes any assets that can be used in order to compensate investors for losses. This can range from personal guarantees to real estate and equipment owned by the business, and can also include intangible assets such as intellectual property (IP). Collateral and Control inputs can often overlap, insofar as pledged collateral motivates business owners or management to deliver the promised returns to investors.

Risk refers to investors’ willingness to take on risk, as well as their ability to manage, diversify and terminate their exposure. The simplest ‘Risk’ input is the participation of new, more risk-loving investors in a market. More complex inputs include the services of investment managers or the presence of liquid secondary markets.

Different financing methods employ different combinations of the four Intermediate Inputs. Normally, when one of the four is missing or is prohibitively expensive to produce, the others must compensate or the ability of the industry to finance businesses sustainably is compromised. Financing large corporates through the capital markets is relatively easy, because it relies on an abundance of relatively cheap Information, Control and Risk inputs. By contrast, SME banking is harder because it can only rely on modest amounts of relatively expensive Information and Collateral inputs.

Seen through this framework, genuine financial innovation is about one of three things:

·         New or more efficient ways of producing the Four Inputs out of combinations of Capital and Labour.

·         New or more efficient ways of combining the Four Inputs

·         Replicating combinations of the Four Inputs that have proven successful and efficient in order to finance previously underserved business sectors/projects.

As the above implies, the Four Inputs model can help distinguish innovations that deliver public value from those that do not. Unhealthy financial sectors can accelerate access to finance without a corresponding increase in any of the Four Inputs, but cannot generate sustainable access to finance in the long run.

Financial sectors that over-rely on one of the four Intermediate Inputs over the others can also become unhealthy. For instance, over-reliance on Collateral inputs can foster inequality and inhibit social mobility, while over-reliance on Risk inputs can threaten financial stability. Of the four Intermediate Inputs, Information makes the most sustainable contribution – and more often than not this is produced by professional accountants.

By applying the Four Inputs model, ACCA is able to shed light on how the finance profession can best support businesses in their efforts to securing finance, and highlight the contribution of professional accountants to this process.

This framework also helps us make recommendations to our policy stakeholders around the world, from global bodies such as the OECD to national governments and business associations.

Further reading

ACCA Global Forum for SMEs (2014) Innovations in access to finance for SMEs

ACCA (2013) Accountants for Small Business 

Chami et al (2009) ‘A framework for Financial Market Development’ IMF Staff Paper no 156 

Published: 30 Apr 2014