Post on 09-Nov-2018
The Voice of Savings and Retail Banking
retail - regional - responsible ■ retail - regional - responsible ■ retail - regional - responsible
EBI 9th Annual Conference Cairo, 8 May 2017
« Promoting Financial Inclusion in the banking sector
Session 3: Enhancing Financial Inclusion through new and
vulnerable consumers /M&SME’s
By Laurie Dufays, WSBI
World Savings and Retail banking Institute –Federation of 100 Institutions in 83 countries worldwide
We are :
RETAIL
REGIONAL
RESPONSIBLE
We focus on
RETAIL BANKING
ACCESS TO FINANCE
DIGITIZATION
We do :
LOBBY
EXCHANGE OF BEST PRACTICES
TRAINING AND CONSULTANCY
CONTENT
SME Overview (Africa, MENA, Egypt)
Obstacles to SMEs’ growth
Policy in favor of SMEs
Taping the opportunity for banks
Action at Government level
To conclude: the way forward
SME’s global view (1)–
The driving force behind economic
development
Europe: 22.3 million MSMEs, 99.8% of all
companies and 67% of total employment.
In Africa: 50 million MSMEs, 69% in the informal
sector. 58% of employment and 33% of the
continent’s GDP
SME’s global view (2)–
SMEs : The driving force behind economic development
Neighbourhood South (Algeria, Egypt, Israel, Jordan, Lebanon,
Libya, Morocco, Palestine*, Syria and Tunisia) : 6 million
MSMEs
IN EGYPT : 2.5 Million SMEs representing 75% of the
total employed workforce and 99% of non-agricultural
private sector establishments.
SME productions account about 80% of the GDP and
contribute to 75% of exports, more than 50% of industrial
production in Egypt.
Their main issue ?
SME’s global view (2)– global, Africa(with sources)
SME’s global view– MENA, Egypt (1)
SME’s global view (3)– global, Africa
Financing the growth in Africa: 84% of investments of SMEs are financed through internal funds compared with 70% in other developing economies. The share of bank financing in Africa is 8%
SME’s global view (4)– The credit gap !
CONTENT
SME Overview (Africa, MENA, Egypt)
Obstacles to SMEs’ growth
Policy in favor of SMEs
Tapping the opportunity for banks
Action at Government level
To conclude: the way forward
SMEs in MENA: Obstacles to SMEs’
growth(source IFC)
Bank lending, the main source of formal finance,
constrained by the relatively poor quality of the legal and regulatory environment,
the limited depth of financial markets and
Lack of competition among banking and financial institutions.
Alternative sources of finance, such as leasing, factoring, mezzanine financing or the provision of equity capital, remain marginal.
Missing the ecosystem
Obstacles to SME growth : from a supply point of view
Most banks are becoming more risk averse /SMEs,
Lack of transparency
Lack of Information /asymmetry/Uncertainty over
creditor rights
Lack of collaterals
High administration costs of small scale lending
Inadequate banking skills for dealing with SME’s
Banks finance the government debt instead
Obstacles to SME growth: from SME side
Belong to the informal sector =>Underutilised financial
services: only 50% of the SMEs deal with formal banks
Incapacity to provide the required information
Low financial literacy and business competence
Incapacity to deal with intricate government regulations
(linked to the fact that many of them are still part of the
informal sector).
SMEs’ projects inability to compete with imported
products and the products of large enterprises.
CONTENT
SME Overview (Africa, MENA, Egypt)
Obstacles to SMEs’ growth
Policy in favor of SMEs
Taping the opportunity for banks
Action at Government level
To conclude: the way forward
Policy in favor of Micro and SME’s: the right steps
The Central Bank of Egypt (CBE) initiative in January 2016
to increase funds directed to MSMEs to EGP 200bn over the
next four years at interest rates not exceeding 5 %.
The CBE obliges to direct 20% or more of Bank loans to
MSMEs.
The CBE establishes a database for SMEs to serve
bankers as well as policy makers.
The CBE requires the banks to start preparing the
financial infrastructure for MSMEs: Specialization in
financing MSME projects, risk calculation, marketing and
debt collection.
CONTENT
SME Overview (Africa, MENA, Egypt)
Obstacles to SMEs’ growth
Policy in favor of SMEs
Taping the opportunity for banks
Action at Government level
To conclude: the way forward
Taping the opportunity as a bank
SME Banking is very profitable business. Returns are often some of the best on a risk-return basis with attractive yields.
SME banking is much more than SME lending: Deposit & transactional banking services are equally important.
Tapping the opportunity as a bank
1. To improve access to finance
2. To use international funds
3. To improve customer journey
4. Go digital
Taping the opportunity as a bank (1)
1) To improve access to finance/ reduce supply –
demand gap in SME lending
Objective : help customers moving from start ups to
established businesses with growth potential
1. Establish a special department dedicated to Micro banking
and for SMEs
2. Improve staff skills and competence
3. Better segment the entrepreneur customer base
4. Improve communication with SMEs in the lending
application process
5. Educate the customers
6. Diversify the offer of P&S based on SMEs’ cashflow
Public Stock Markets
SM
E C
ash
Flo
ws
SME Development Stages
HIGHER RISK
Seed Phase Start-up Phase
LOWER RISK
Emerging Growth Development
Portfolio Guarantees & Credit Enhancement
Formal VC Funds & Mezzanine Funds
VC Seed & Early Stage
Business Angels, TT
Microcredit
EIF Tool Kit for SMEs
Taping the opportunity as a bank (1)
CUSTOMISED
PACKAGES
Risk Sharing
Instruments
Start-up Finance
Market Outreach
Financial Inclusion
BRANCHBUSINESS CENTRE
CORPORATE CENTRE
Relationship Banking
Advisory
Services
Rehab
Credit / Risk
Expertise
Busi
ness
Gro
wth
Time
Start-up Overdraft
Start-up Financing Package
SMEG
Risk Sharing Instruments
Bridge Financing
Structured SME Financing
Export Guarantee
Financing
Business OverdraftBusiness Loan
Business Property LoanGeneral Banking Facility
Tapping the opportunity as a bank
1. To improve access to finance
2. To use international funds
3. To improve customer journey
4. Go digital
Taping the opportunity as a bank (2)
Take advantage of the International /European /national
5 EU facility programmes for Financial Inclusion:
1. SANAD: MF through local financial institutions and capcitybuilding
2. SEMED Advisory services to SME through grants
3. FEMIP : support to risk capital/venture capital
4. MENA SME : guarantee funds tocover losses of local banks lending new funds to SMEs
5. SEMED MSME : SME credit lines and capacity building to local financial institutions
6. Financing by EIB, EBRD, EC, KFW, Afd
NEAR-B2@ec.Europe.eu
Tapping the opportunity as a bank (3)
1. To improve access to finance
2. To use international funds
3. To improve customer journey
4. Go digital
Taping the opportunity as a bank (3) :
To improve the customer journey
Taping the opportunity as a bank (3) :
To improve the customer journey
Make their business easierHelp them to manage the day to day
How ? Ex. • Info on their markets, competitors, • Help them access their treasury all
the time• Help them build & manage their
client database• Share your IT platform for managing
their database
Taping the opportunity as a bank (4)
Go digital
Egypt, Nigeria, and South Africa accounted for about a third of Africa’s total mobile subscriber base at the end of 2015, (GSMA)
Taping the opportunity as a bank (4)
To improve customer journey and become more digital
Examples: starting from … to
- pre-paid cards allowing transfers and remittances, and savings
- App to access information on the account
- App to access information on local businesses’ figures and position = Benchmarking
- App that facilitates daily management : accountancy, permanent view on treasury with projections, access customer data
DATA & TRANSACTIINS ANYTIME ANYWHERE
CONTENT
SME Overview (Africa, MENA, Egypt)
Obstacles to SMEs’ growth
Policy in favor of SMEs
Taping the opportunity for banks
Action at Government level
To conclude: the way forward
Action at government level
Better legislative infrastructure : Bankrupcy rules; possibility for creditors to use collaterals
Encourage banks to build on their expertise in matching their clients in different stages of the value chain
Make rules more easy to apply thanks to (standardized template to update financial methods for financial reporting )
Build an ecosystem with all the actors including the new entrants and Fintechsbut also the educational system.
TO CONCLUDE
Being a bank is no longer enough and banks should definitely look beyond theirtraditional banking products and services
Define your business model
Develop a brand
Access to finance
Strengthen your risk assessment policy
Train your staff
Become a partner of your client
Help him/her to manage their business
Diversify your offer
Build partnerships