Citibank ® e-Business Sankar Krishnan, Oct. 21, 2001 e-Services for SMEs.

Citibank® e-Business

Sankar Krishnan, Oct. 21, 2001

e-Services for SMEs

e-Business Middle East, Africa & South Asia 2

Agenda

Challenges

Traditional Approach

Emerging Trends

Structuring Solution Sets

Building Blocks of a SME Proposition

Key Success Factors for a SME

e-Solution Examples

Way Forward


Challenges

Challenges for SMEs

• Fragmented markets and limited opportunities for economies of scale

• High trade barriers

• Lack of supply chain management

• Limited trading opportunities

• Inadequate product development

• High transactions cost & complex fulfillment procedures

• Inadequate access to technological know-how

• Inadequate access to financing

• Inadequate access to information

Challenges for FI’s

• Risk Management - Considered as High Risk

• Information Asymmetry

• Micro Credit Management - Higher Administrative & Transaction Costs

• Lack of Appropriate Credit Guarantee Mechanisms

• Lack of Leveraging Skills with existing Top End Corporate Relationships

• Sub-Optimal Technology Adoption


Challenges for SME’sChallenges for SMEs

• Fragmented markets and limited opportunities for economies of scale

• High trade barriers

• Lack of supply chain management

• Limited trading opportunities

• Inadequate product development

• High transactions cost & complex fulfillment procedures

• Inadequate access to technological know-how

• Inadequate access to financing

• Inadequate access to information

Advantages of e-Procurement

• Aggregation of buyers and suppliers• Intermediation with services providers• Delivery capabilities across the target regions and beyond, and

supported by logistic and supply chain management expertise• Help SMEs streamline operations & business relationships (e-logistics

& e-Procurement)• Provide access to new trading opportunities • Buyers accreditation with previously inaccessible global suppliers• New market channels to suppliers • Help SMEs develop more customer-centric products based on in-

depth research and customer specific feedback (online and offline) through CRMS

• One point of contact with service providers, reducing administrative costs associated with follow up

• Stimulate technology transfer through use of strategic alliances with key players in the technology sector

• Provide bundled value added online services such as internet enablement, web hosting, etc

• Help SMEs finance their businesses through: Financial Institution Strategic Partners (Subject to usual Internet Policies and Procedures)

– Online payment facilities – Credit facilities provided by FI alliance partner

• Provide access to quality information through the portal that would not otherwise be available

• Syndicate, aggregate, and disseminate rich content customized to meet the SMEs requirements - country and industry specific newsfeeds, local regulations, etc.


Traditional Approach

• Delay in obtaining finance• Venture Capital Option tend to be avoided• Inadequate quantum of Credit• Elaborate Documentation Hassles• Inflexibility in structuring solutions

• Individual Credit Appraisal

Mechanism

• Superior Service based on

Performance Success

• One on One Relationship

• Individual Services

• Higher Returns

• Incentives from

Government

• Discretionary Lending

• Resource & Administrative Intensive• Risk- Return Parameter• No-Portfolio Approach• Lack of Clarity on Customer Segmentation & Needs

BENEFITS CONSTRAINTS

SME

BANK


Emerging Trends

JANUARY 2000

Africa 2.1 Million

Asia/Pacific 40 Million

Europe 70 Million

Middle East 1.9 Million

Canada & USA 120 Million

South America 8 Million

World Total 242 Million

Source: Various; Methodology

World Total

2000 242 Million

2001 349 Million

2002 490 Million

2005 765 Million

Emerging Trends

• Internet Communities evolving

• Cost of Access going down

• Greater Information Sharing

• Widening of Market : Access to e-Space

• Enhanced Technology Adoption (e.g. ERP, etc.)


Uses of Internet by European SMEs, 2000

18%

22%

26%

27%

32%

46%

51%

79%

Recruitment

Teleworking

B2C e-Commerce

B2B e-Commerce

After Sales Service

Distance Collaboration

Promotion & Advertising

Gathering Information on Markets & Competition

Source : Flash Eurobarameter, July, 2000

Emerging Trends

Top Benefits from Online, 2000

Faster Order Time Convenience Cost Savings Speed/time savings


Structuring Solution Sets

Decline

Stage V

Advisory M&A

Stage IV

Advisory M&A

Stand Alone

Business

MatureRapid GrowthEarly Stage

Individuals as

Consumers

Individuals in

Business

Individual in

Business

Partnership & Family Owned

Businesses

Small & Medium

Sized Companies

Top TierLocal

Corporates

GlobalCorporates

Small and Medium Enterprises Consumer Business & Professiona

l

SME

Stage I

(Leverage Personal Assets)

Citibanking Personal

Mortgage Backed Credit

Financial Assets Backed Credit

Deposits Insurance

Stage II

Cash Management Trade Services FX Working Capital

Line Equipment Finance Business Mortgages Deposits Insurance Value Added

Services

Stage III

Venture Capital

IPO Advisory

Corporate Banking

Consumer Banking

SMEs typically constitutes 40% of the banks corporate revenue base!!!


Building Blocks of a SME Proposition

Segments

Products

Channels

e-Solutions

Value Added Propositions

MANUFACTURINGTRANSPORTATION

& COMMUNICATION

WHOLESALE&

RETAIL TRADESERVICES INTERNATIONAL

CASH TRADE FX LOANS ABF DEPOSITSVALUE ADDED

SERVICES

Customer Based

Sales• Industry Team Leader• Developer (mobile)• X-Seller (mobile)

Delivery• Internet EB• Fax• Phone• Correspondent Bank Network

Bank Based

• Anchor (Telemarketer) • Anchor• Customer Service

Web Based Access for• Banking Accounts• Service Delivery

Community Portals for• Information Exchange• Trading• e-Procurement• Financial Settlement


PRODUCTSExisting vs. New

Anchor & Centerof Plate vs. Sec. & X-Sell

Working Capital- Vendor FinanceTerm Finance

Trade Finance- Domestic- InternationalStructured ProductsGuaranteesLiabilities Products*

Working CapitalTerm FinanceCash Management

Trade Finance- Domestic- InternationalStructured ProductsGuaranteesLiabilities Products*

Working Capital- Channel FinanceOperating AccountCash Management

Term FinanceGuaranteesLiabilities Products*

Auto Loans- HP / Loan- RefinanceLiabilities Products*

CardsMortgagesPersonal LoansBranch Bankinge-Banking

*Liabilities includes currently 3rd party products like Insurance and Mutual Funds

SuppliersMNC / Large Corporations / SME

OEMsMNC / Large Corporations (Tyres, Batteries)

OEMMNC / Large

Corporate

ChannelSME

After-MarketWksp / Retail

CUS TOMERS

EMPLOYEES

Industry• Size $15B• Flows approx. $

25B• Includes

-Cars-CVs-Tractors / MUVs-2 Wheelers-New & Replacement Market

Technology Envelope

e-Finance


Key Success Factors for a SME

Appropriate Organizational

Structureand

Financial Model

Participant relationships• Member acquisition and retention• Member management

Value-added Services• Logistics• Decision support• Financial services

Risk Evaluation Mechanism Portfolio Approach Target Market Approach Credit Scoring Mechanism Geographical Reach Diversified Portfolio Credit Guarantee

Vertical Domain Expertise• Industry specific content• Buyer & supplier of data

Transaction/Technology• Commerce engine platforms• Software applications• Profiling technologies• Hosting• Security


e-Solutions for SMEs- A Few Examples


A SME community

portal with

Value Added services


A B2B e-procurement portal for SMEs in the Middle East, North Africa & South Asia

region.


Example of Value Propositions

A B2B vertical exchange for the pharmaceutical industry

in Egypt


Way Forward Credit Bureau

Information Sharing / Resources

Partnership with Industry

Government Encouragement

Priority Sector Approach

Credit Guarantee

Convergence

Financial Services

e-Solutions

Value Added Propositions

Citibank ® e-Business Sankar Krishnan, Oct. 21, 2001 e-Services for SMEs.

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