IFC SME Banking Advisory Services

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• IFC SME Banking Advisory Services
• May 10, 2005

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SME Definitions
0-14 staff
15-49 staff
50-199 staff
gt 200 staff
MICRO
SMALL
MEDIUM
LARGE
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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

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SMEs and Economic Development in Emerging Markets
Estimated SME Contribution to Employment
Estimated SME Contribution to GDP
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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
• US100m 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

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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

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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

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3 Sub-segments/approaches

• Micro-enterprises micro-finance
  approach/products leveraging banks network and
  resources
• Small-enterprises scale-up retail banking
  scoring, mass-market, packaged products
• Medium scale-down corporate banking rating,
  semi-packaged, enhanced/simplified/streamlined
  corporate banking

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Completed and Ongoing Mandates

• United Bank of Egypt (UBE), Egypt
• Commercial International Bank (CIB), Egypt
• Banque Misr, Egypt (2 projects)
• Export Development Bank of Egypt (EDBE), Egypt
• Alexandria Businessman Association, Egypt
• Banque Commerciale du Maroc (BCM), Morocco
• Banque Centrale Populaire (BCP), Morocco
• Banque Internationale Arabe de Tunisie (BIAT),
  Tunisia
• Credit Populaire dAlgerie (CPA), Algeria
• Ryad Bank, Saudi Arabia

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Example 1Egypt Banque MISR
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Example 2 Morocco BCM
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SMEs in Pakistan a large market

• A Cornerstone of the Economy
• 90 of businesses are SMEs (250,000 gt 5
  employees)
• 30 of GDP
• 80 of workforce
• 50 of FX earnings
• Concentrated in Trade (51) and Services (34)
• Manufacturing (15)
• Textile
• Food Processing
• Leather
• Metal products (auto. Spare parts, bicycles,
  elect. fans..)
• Wood Furniture
• Marble/granite
• Important vehicule of poverty reduction
  (employment to low income groups)
• Low productivity

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but largely untapped/underserved

• Lack of finance is first barrier to growth
• Limited access to formal credit
• gt 5 employees less than 5
• gt 100 employees less than 13 for working
  capital
• Only 15 of aggregate banks loans
• Perceived by banks as high risk, costly,
  unprofitable
• Banks have surplus liquidity

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SME Banking in Pakistan

• SIGNIFICANT MARKET POTENTIAL
• OPPORTUNITIES FOR BANKS TO ENTER THE SME MARKET
• WITH APPROPRIATE TOOLS, PRODUCTS, PROCESSES,
  ORGANIZATION
• .AND SUPPORT FROM IFC

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Next

• Expression of Interest by Bank
• Diagnostic questionnaire and assessment visit
• Banking Advisory Proposal and Terms Of Reference
  (objective, deliverables, budget and time-plan,
  cost-sharing)
• Consultants selection and budget finalization
• Advisory Services Agreement
• Contracting consultants
• Project kick-off

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Please contact
If you are interested.

• IFC Islamabad
• Ayesha Muzaffar
• amuzaffar_at_ifc.org
• IFC Cairo
• Antoine Courcelle-Labrousse acourcelle_at_ifc.org