IFC SME Banking Advisory ServicesMay 10, 2005.ppt

IFC SME Banking Advisory Services May 10, 2005 SME Definitions SME Policies SMEs are Key for Economic Development… They provide most of the employment opportunities They are flexible in economic downturns They allow a homogeneous geographic development SME Development in a country requires: A strong culture of Entrepreneurship A business enabling environment Low barriers to entry and development Adequate legal and regulatory framework Access to Finance Financing Needs: Start-Up: Self-financing, Family, Venture Capital, Micro-Finance, Government Guarantee Schemes Growth: Banking and Specialized Financial Services Maturity: Banking Services, Bond Markets, Stock Markets SMEs and Economic Development in Emerging Markets IFC Technical Assistance in MENA region 3 year technical assistance program to support private sector development Covering 22 countries, from Morocco to Pakistan Managed by International Finance Corporation US$100m co-financed by IFC and bilateral donors 5 Pillars: Financial Sector (SME banking, leasing, housing, banks corporate governance) SMEs Business Enabling Environment Privatisations Public-Private Partnerships SME Banking Advisory Services OBJECTIVE: Develop the SME finance supply by improving the capacity of commercial banks to serve this market RATIONALE : SMEs are a central factor for growth and job creation in developing countries Access to Finance is mandatory for SMEs growth and sustainability There is a gap between where micro-finance ends and corporate banking starts SME Banking has proven to be highly profitable when best practices are applied Scope of Advisory Services Bank SME Strategy SME Definition Market segmentation Risk Management Credit Policy Risk Rating/ Scoring Product Development Organization Structure Bad Debt Recovery and Collections IT Systems Staff Training on new products/processes Micro-enterprises: micro-finance approach/products leveraging bank’s network and resources Small-enterprises: scale-up