Global and Regional Insights into Supporting SME Access to Finance

Report
Global and Regional Insights into
Supporting SME Access to Finance
Andrew McCartney: Lead Global Specialist, SME and
Gender Finance, FIG Advisory Services
Sri Lanka, October 2014
Key Messages
• SMEs are crucial for the creation of jobs, to reduce poverty and increase
the shared prosperity.
• The environment has improved for SMEs, but access to finance remains a
key constraint for their growth, with a $1 trillion credit gap remaining
globally
• IFC’s work with the G20 identified a number of areas that policy makers
need to consider in further supporting SMEs. These recommendations
have also driven IFC’s own strategy to support the financing of 10 million
SMEs by 2020
• SMEs are a key segment in Sri Lanka representing some 50%+ of GDP,
but access to finance remains a constraint.
• Our strategy for Sri Lanka is focusing upon addressing key areas,
including: 1) Informality 2) Gender 3) furthering FI outreach with focus on
post-conflict and lagging regions, as well as targeting specific growth
sectors such as agriculture and tourism
• IFC as market leader in this space has the investment and advisory
products and services needed to further support SME growth in Sri Lanka
2
SMEs are a strategic priority for IFC and is a key channel
for supporting other strategic priorities
IFC’s Vision : That people should have the opportunity
to escape poverty and improve their lives
IFC’s Purpose:
Create opportunity for people to escape
poverty and improve their lives by:
Mobilising other sources of finance for
private enterprise development
Promoting open and competitive markets in
developing countries
Supporting companies and other private
sector partners where there is a gap
Helping generate productive jobs & deliver
essential services to the poor & vulnerable
3
IFC’s Strategic
Priorities
SMEs
SMEs
Agribusiness /
food security
Infrastructure
Fragile
Situations
Climate Change
3
3
A lack of finance stunts SME growth in emerging markets and
limits their ability to create jobs
Percent of Enterprises citing biggest obstacle
(SMEs between 5 -100 employees)
Source: IFC Data Analysis
 In 71% of countries SMEs cite Access to Finance as the biggest obstacle above
access to electricity
 In 66% of countries SMEs cite Access to Finance as biggest obstacle above
access to electricity and transport
Source: Enterprise Surveys
4
Access to finance for SMEs has improved significantly in the
last 10 years globally, but significant gaps remain
Positive Trends
»
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More stable macro
»
environments
Financial sector deepening
»
Less crowding out of private
sector credit
»
Spreads declining on
corporate clients
Financial sector diversification
»
Emerging Trends globally
Improving financial
infrastructure
Growing number of banks
with basic or strong core
SME lending operations
Increased penetration of
mobile phones, internet &
other new technologies
Number of SMEs in global,
regional or national value
chains are growing
»
»
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»
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Remaining Gaps
SMEs in FCS and LICs
Very Small and Rural
SMEs
Start-ups
Women-owned businesses
SMEs with weak collateral
High-growth SMEs
Local currency finance
Mobilization of capital
markets to finance SMEs
Capacity building for SMEs
Over 80% of SMEs have an account with a bank
while only 31% have a loan or overdraft
5
At the policy level, IFC has made a set of key recommendations as
part of its work with the G20 to further enable SME finance
 G20 SME finance Sub Group identified successful models
& policy measures for SMEs
 Work involved review of 164 different interventions
globally and subsequent policy requirements
 Resulted in nine major recommendations to support SME
growth
Key Recommendations to the G20 Sub-Group







Developing specific country strategies
Developing supporting legal & Regulatory framework
Strengthening the financial infrastructure
Effective government support mechanisms
Building reliable data sources for SME finance
Building the capacity of financial institutions
Address specific market failures e.g. women and
agriculture
 Establish a Global SME finance Forum as a knowledge
sharing platform
SME Finance Policy Guide – issued October
2011 by IFC
6
Our SME strategy globally focuses upon supporting finance
of 10 million SMEs by 2020 through 5 key priorities
Our Objective: Contribute to financing 10 million SMEs by 2020
5 priorities for delivering on objectives:
1. Scale up partners: Supporting market leaders and
1
first movers to reach SMEs at scale
2.
Target Segments: Increased coverage for
2
underserved segments
3.
3 Innovation: Innovation to diversify services, and
reduce the costs and risks of SME finance
4. Leverage: Increase mobilization and technical
4
support for SME finance from other partners
5. Delivery excellence: Delivering best-in-class
5
products and services to clients
7
Our SME strategy for Sri Lanka focuses upon 3 key themes
Opportunity
Theme
1
•
Informality
2
Women in
Business
•
•
•
•
•
•
Our Strategy
High level of informality today, with only
2% operating as legal entities
Lack of business case currently
Represent a key constraint on growth in
certain sectors e.g. tourism
•
Women in low growth occupations
Low labor force participation in the last 3
decades
Higher level participation in rural areas
Unemployment rate for women double
that of men
•
•
•
•
•
3
FI Reach
• 64% of MSMEs without checking/savings
account
• FIs need MSME lending products, weather
index and other insurance products, mobile
banking
• Need for penetration to lower end of
financial spectrum
• FIs lack focus, liquidity and appropriate
tools to lend to SMEs
Support FI’s to start targeting
informal entities
Support simplification of
registration & reporting
Support banks with investment
and advisory package to reach
women
Develop gender focused MSME
program
Leverage innovative financing
models
Partner with women
organizations
•
Increase investments in FIs for
growth and outreach (NE)
• Provide product diversification,
and improved lending
methodologies
• Support secured transactions and
promote registration of movable
collateral
8
IFC is uniquely positioned to help address the SME
Access to Finance challenge in Sri Lanka
Main Pillars of IFC Services in SME Finance
Investment
Services
 Risk Sharing
 Credit Lines
 Loans
 Equity
 SME & Credit
Insurance
 Supply Finance
 Trade Finance
Strategy &
Business Model
 Global knowledge
and best practice
sharing
 SME specific
diagnostic
methodology
 Local Market
knowledge and
research
 MIS & data
analytics support
 Sub-segment
identification (i.e.
Women, Agri)
 Value proposition
and business
model design
 Tools to identify
capability gaps
Products,
Services &
Marketing
Sales &
Delivery
 Product advisory
specific to SME
 Customer
management
 Customer value
proposition:
- Acquisition
- Cross selling &
deepening
- Product bundling
- Segment mgmt.
- Activation &
retention
- Product programs
 Opportunity sizing tool  Delivery Channels
and solutions
- Existing networkutilization
 Non-Financial
improvements
Services (NFS)
- Market research
- Strategy development
- 3rd party alliances
Credit & Risk
Mgmt.
 Data & analytics
 Credit policy advisory
/ re-engineering
 Alternative credit
assessment &
behavioral scoring
 Early warning
framework &
monitoring
 Collections policy
and framework
- Expansion (e.g.
branchless, mobile,
POS/Cards,
agents)
- NFS value proposition
 Supply Chain Finance
 Islamic finance
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