SME BANKERS FORUMsme.ebi.gov.eg/sites/Arabic/networkingactivities... · 2011. 9. 28. · Programme...
Transcript of SME BANKERS FORUMsme.ebi.gov.eg/sites/Arabic/networkingactivities... · 2011. 9. 28. · Programme...
SME BANKERS FORUM
„SME BANKING: MAKING IT HAPPEN‟
CAIRO: 11TH MAY 2010
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AGENDA
FIVE things to ‘get right’ for SME banking
1. OBJECTIVE: Be clear why you are doing this
2. MODEL: Be clear on the model that works
3. ROAD MAP: Follow the road map to get there
4. SUPPORT: Use available advice & support
5. PERSEVERE: Be confident and don’t waver
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1. OBJECTIVE: why?
Objectives to pursue SME banking vary
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STAKEHOLDERS
MAIN OBJECTIVE COMMENT
Government, Central
bank, (MFIs?)
Macro-economic Some debate on macro-
benefits of SMEs
Banks Financial SME banking profit
share in total ‘profit mix’
Industry/SME Groups Operational Constraint removal
Other (academics etc) Philosophical Dated, cultural
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1. OBJECTIVE: profit
Banks are in SME banking for profit BANK PROFIT SOURCES (illustrative)
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1. OBJECTIVE: profit
Banks are in SME banking for profit SME banking; ROA total bank & ROA S/ME activity
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Source: IFC survey 2007
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2. MODEL
Today we have time for only 3 aspects
1. ELEMENTS: what makes SME banking a
success
2. BEST PRACTICE BENCHMARKS: what good
SME bankers are doing
3. FUTURE TRENDS: what is changing in SME
banking
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2. MODEL: key elements
A list of important SME banking elements includes
BOARD LEVEL
• SBU – separation, autonomy, prominence
• Top career path for SME team (inc. front-office)
• Different operating culture (entrepreneurial)
• Little lending: stress deposits, advice/BDS
• Overall, about 20 key success factors (KSF)
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2. MODEL: key elements
At GM LEVEL, the ‘all-or-nothing’ KSFs are:
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IN BANK
1 Establish a separate SBU
2 Adapt STRATEGY for SME sub-groups
3 Create separate FUNCTIONS (e.g.....)
4 Place staff on TOP CAREER PATH
5 Instil entrepreneurial CULTURE
6 Cross-sell RANGE OF PRODUCTS
7 Introduce CREDIT SCORING
8 Tailor overall RISK MANAGEMENT
9 Establish specific PRICING for SMEs
10 Control CLIENT/PRODUCT PROFIT
FOR CUSTOMERS
11 Provide publicity and build ‘brand’
12 Know the sub-segments
13 Conduct regular market research
14 Innovate well-priced SME products
15 Tailor fast & simple processes
16 Educate & advise customers
17 Run regular visit/collection/follow-up
18 Provide easy access delivery
19 Train relationship managers (RMs)
20 Innovate with ‘client’ technology
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2. MODEL: key elements
These KSFs may seem generic but they all need
tailoring to SMEs
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“To effectively serve SMEs, banks have had to change the
way they do business, and manage risk, at each stage of
the banking value chain”
IFC SME report 2009
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2. MODEL: best practice
Globally, SME banks are not homogeneous
• OWNERSHIP differs; state-owned, private, jv
• CORE BUSINESS differs; universal banks,
specialised FIs
• LAUNCH POINT differs; upscale from micro,
downscale from corporate, start as SME bank
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2. MODEL: best practice
Pro-Credit Bank is a micro bank up-scaling to SME
www.procredit-holdings.com
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Profile „Benchmark‟ features
-Established 1998: owned IPC, IFIs
& NGOs
- Autonomy at operating level; central
services
- Banks in 21 countries on 3
continents; HQ in Frankfurt, micro
emphasis
- Emphasise staff training (Academy),
advice & deposit gathering
- ROE 8.4%, CAR 13.1% while
investing, 1.7% NPLs
- ‘Text-book’ application of KSF; the
Pro-Credit ‘revolution’ – transparency,
efficiency & profitability
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2. MODEL: best practice
DBS has made Enterprise banking a core strategy
www.dbs.com
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Profile „Benchmark‟ features
- Established 1968: listed - Separate ‘Enterprise Bkng’; 5 markets
- Best Small Bank in India award 2009
- SMEs in top Board-level strategy
- In 10 countries in Asia;
Singapore based, universal bank
- About 18 products in 6 categories
- Focus cash mgmt & trade
- ROE 8.4%, ROA 0.8%, NPL
2.9%, CAR 16.7%
- Few branches
- Emphasis technology
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2. MODEL: best practice
StanChart is a global player active in SME banking
www.standardchartered.com
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Profile „Benchmark‟ features
- Established ‘65 (but 100+ years
ago), publicly listed
- Multi-segment universal bank
- Clinton Initiative $380 m for micro
- In 71 markets on 5 continents;
HQ UK, 77,000 employees,
‘traditional’ bank
- SME SEPARATE (19% of Consumer
bank income); special pricing, RM &
advice, wide product range especially
cash mgmt. FX, trade finance
- 14.3% ROE, profits $ 5.2 billion
on op income $15.2 billion
- Link SMEs into wide branch network;
focus on women sub-segment,
different service levels (cost control!)
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2. MODEL: best practice
IBK Korea puts into practice the KSF
www.ibk.co.kr
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Profile „Benchmark‟ features
- Established 1961: 65% Govt. rest
listed 11% international
- Specialised for SME: the Vision
- 4 core values: Customer happiness,
Trust, Creative passion, Teamwork
- In 6 countries; HQ in Seoul, >75%
SMEs (now growing retail)
- Big product range (& via subsidiaries)
- Strong advisory (‘financial doctor’)
- 0.5% ROA, 9.1% ROE, 1.2% NPL,
CAR 11.9%, 100% loan/deposits
- Emphasis staff training
- Cross-selling; ‘comprehensive
financial service’
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2. MODEL: best practice
ICICI is an oft-quoted leader in the field:
www.icicibank.com
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Profile „Benchmark‟ features
- Established 1955: changes in
1994: public listing
- Business Banking 1 of 5 segments
- Extensive sub-segmentation
- In 18 countries on 3 continents,
universal bank
- Wide product range; emphasis
advice, BDS, ‘CASA’ deposits
- No. 2 in India, $81bn assets, 1.2%
ROA, 8.4% ROE, NPL 2.2%
- Many IT-based delivery channels
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2. MODEL: best practice
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2. MODEL: best practice
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2 MODEL: best practice
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2. MODEL: best practice
Two other banks are on a smaller scale
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BIAT Tunisia
- Wide product range (cash mgmt. &
deposits)
- Innovative branches
- Consulting/advisory arm & coordination
Access
Bank
Nigeria
- Again wide product range (cash mgmt.)
- Gender Empowerment (GEM)
- Reduced charges for SME
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2. MODEL: best practice
Many other banks could also be reviewed; e.g.
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SME Bank Malaysia Big OECD banks e.g. HSBC, ANZ,
ING, LloydsTSB, WellsFargo
Diamond Trust Bank Kenya
EBRD client banks e.g. Banca
Transilvania in Romania, Bank
Siauliu in Lithuania
Small Italian/Spanish banks E.G.
Cassa di risparmio, caja de ahorro Many Latin America examples
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2. MODEL: best practice All these banks took time and advice to get there
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SME/COMMERCIAL
banking: Market
Attractiveness
1 GDP growth &
macro economy
2 size &
development
3 profit potential &
competitive
intensity
4 consumer needs &
buying criteria
5 risks
6 timing
High
Low
„Fit‟ with bank‟s capabilities in....: i.e. its
shareholder objectives, SME banking
products, SME customers, SME skills in
staff, systems, branches, funding
Low High
Build/grow Maintain
Exit Avoid
TIME
ADVICE (and
SELECTION)
RESEARCH
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2. MODEL: the future
SME banking is a fast-changing target
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“SME banking is an industry in transition”
IFC SME report 2009
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2. MODEL: the future
And 3 major influences will affect the model
• CUSTOMERS: more sophistication, more
demanding, more IT
• DELIVERY: more ease of access through
multiple (IT-) channels
• COMPETITION: from banks & non-banks – e.g.
MNOs/telcos & mobile money
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3. ROAD MAP
Entering/growing SME banking is like any other
new business venture
• 4 STEPS: there are 4 (familiar) steps involved
in ‘getting in’
• LAUNCH POINT: the way in is easier from
some launch points than others
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3. ROAD MAP: four steps
Four steps must be followed to ‘get it right’
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1. Appoint
working party
2. Produce
feasibility &
business plan
3. Decide at
Board level
4. Implement
in phases
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3. ROAD MAP: four steps
The ‘contents’ of each step are important
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Step Contents
1 Appoint working
party
- Manager designate (& team members)
- In-bank & external support
2 Produce feasibility
and business plan
a) Market & competition
b) Strategy (product/client matrix)
c) Delivery channels & operations
d) Financials
e) Implementation conditions & plan
3 Decide at Board level - Hold ‘change management’ session
- Decide on SBU & organisation change
- Decide on different operating culture
- Decide on strategy, targets, resources
4 Implement in phases - Phased business launch
- Checks against KSF
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3. ROAD MAP: four steps
Two are ‘routine’; but two are not
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SME Banking Forum 11-5-2010
Step Contents
1 Appoint working
party
Traditional/routine
2 Produce feasibility
and business plan
Traditional/routine
3 Decide at Board level Non-routine: launch of different business
Understand what you are getting into and the extent of change needed
4 Implement in phases Non-routine: launch of different business
Measure progress for each KSF against benchmarks
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3. ROAD MAP: four steps
Regular checks of mastering KSFs are needed
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Banking key success factor = best practice
(ILLUSTRATIVE & PARTIAL)
Does your bank do this?
At all? Partly? Fully? Well?
• Provide publicity and build ‘brand’
• Know the sub-segments
• Conduct regular market research
• Innovate well-priced SME products
• Tailor fast & simple processes
• Educate & advise customers
• Run regular visit/collection/follow-up
• Provide easy access delivery
• Train relationship managers (RMs)
• Innovate with ‘client’ technology
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3. ROAD MAP: launch point
Entering a new business is usually easier if you
are already familiar
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COR-
PORATE
SME
MICRO
RETAIL
„BUSINESS‟
END
DOWNSCALE? From being used to:
Sophisticated clients/data
Office-based ‘paper’ work-flow
Formal (slow) operations
UPSCALE? From being used to:
Un-sophisticated clients/ little data
Out-at-clients; judgments
Entrepreneurial (quick) operations
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3. ROAD MAP: launch point
If you are already in SME banking ….. review!
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Step Contents
1 Appoint working
party
Essential review
-Review the steps followed
-Re-do them if necessary
2 Produce feasibility
and business plan
3 Decide at Board level
4 Implement in phases
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4. SUPPORT
There are at least 3 kinds of support for entering
SME banking: use them!
1. TRAINING: expanded technical courses
envisaged from second half 2010
2. ADVICE & TECHNICAL SUPPORT: range of
advisory inputs available
3. KNOWLEDGE/RESEARCH: growing body of
knowledge for you to tap into
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4. SUPPORT: training
A menu of technical courses is envisaged
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Programme type EBI Courses (in planning phase)
Certificate 1 Five module 150 hour Certificate course
SME Banking
2 SME Banking for bankers: overview
3 Strategy for SME banking
4 Operations for SME banking
5 Products for SME banking
6 Marketing for SME banking
7 Delivery channels for SME banking
8 Risk management for SME banking
9 Credit scoring for SME banking
10 Pricing & profit mgmt for SME banking
11 HR & operating culture for SME banking
A2F 12 Banking for SME entrepreneurs
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4. SUPPORT: training
Many are planned to be available by Q4 2010
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Indicative schedule for courses: 2010 Q2 Q3 Q4
1 Five module 150 hour Certificate course
2 SME Banking for bankers: overview
3 Strategy for SME banking
4 Operations for SME banking (2011)
5 Products for SME banking
6 Marketing for SME banking
7 Delivery channels for SME banking
8 Risk management for SME banking
9 Credit scoring for SME banking
10 Pricing & profit mgmt for SME banking (2011)
11 HR & operating culture for SME banking (2011)
12 Banking for SME entrepreneurs
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4. SUPPORT: advice
Several advice options could be provided
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Advice option
Provides Typical
days
Output
Verification
check
A second
opinion on
progress
±5
- 1 day workshop
- Slide presentation
- Short report
Business plan A full business
plan 15-20
- Several 2 hr workshops
(training)
- Slide presentation
- Full business plan
Implementation
support
Essential
hands-on
learning-by-
doing
5-10+
- Design document
- Training
- Draft manuals
- Application sessions
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4. SUPPORT: advice
Practical aspects are being fine-tuned
• Joint teams: full ownership will be with bank
• Consultants: you will be given a choice (tender)
• EBI role: will co-ordinate & organise
• Working with you: full confidentiality
• Fees: minor relative to benefits
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4. SUPPORT: knowledge
A growing body of ‘knowledge services’ is building
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SME STUDIES
- Data survey
- Best-practice reviews
- Studies
e-PUBLICATIONS
- E-library of abstracts
- Quarterly SME outlook
- Proceedings of meetings
(on EBI SME website)
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5. PERSEVERE
You could expect setbacks: external & internal
EXTERNAL: macro/crisis, regulatory, competition
INTERNAL: methods, approaches, investments
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5. PERSEVERE
But persevere and these can be overcome
a) Other banks: e.g. Eastern Bank Limited
b) Emerging markets: confidence & innovation
c) Egypt: doing well and grounds for optimism
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WRAPPING UP
We hope you are persuaded that
1. OBJECTIVE: Banks can make good SME profit
2. MODEL: This is available; not an ‘unknown’
3. ROAD MAP: Four steps will get you there
4. SUPPORT: A wide range of support is available
5. PERSEVERE: You will overcome the ‘bumps’
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