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

2

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

SME Banking Forum 11-5-2010

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1. OBJECTIVE: why?

Objectives to pursue SME banking vary


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


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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At GM LEVEL, the ‘all-or-nothing’ KSFs are:


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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These KSFs may seem generic but they all need

tailoring to SMEs


“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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Pro-Credit Bank is a micro bank up-scaling to SME

www.procredit-holdings.com


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

http://www.procredit-holdings.com/




http://www.procredit-holding.com/front_content.php

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DBS has made Enterprise banking a core strategy

www.dbs.com



- 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

http://www.dbs.com/

http://www.dbs.com/Pages/default.aspx

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StanChart is a global player active in SME banking

www.standardchartered.com



- 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!)

http://www.standardchartered.com/

http://www.standardchartered.com/

http://www.standardchartered.com/home/en/index.html

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IBK Korea puts into practice the KSF

www.ibk.co.kr



- 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’

http://www.ibk.co.kr/

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ICICI is an oft-quoted leader in the field:

www.icicibank.com



- 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

http://www.icicibank.com/

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17



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2 MODEL: best practice


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Two other banks are on a smaller scale


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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Many other banks could also be reviewed; e.g.


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


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


“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’


1. Appoint

working party

2. Produce

feasibility &

business plan

3. Decide at

Board level

4. Implement

in phases

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The ‘contents’ of each step are important

m


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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Two are ‘routine’; but two are not

m


Step Contents

1 Appoint working

party

Traditional/routine


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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Regular checks of mastering KSFs are needed


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


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!

m


Step Contents

1 Appoint working

party

Essential review

-Review the steps followed

-Re-do them if necessary


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


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


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


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


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’


SME BANKERS FORUMsme.ebi.gov.eg/sites/Arabic/networkingactivities... · 2011. 9. 28. · Programme...

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Transcript of SME BANKERS FORUMsme.ebi.gov.eg/sites/Arabic/networkingactivities... · 2011. 9. 28. · Programme...