Traditional & Alternative Business Models for SME Financing in Asia

Transcription

1 Traditional & Alternative Business Models for SME Financing in Asia ESCAP Workshop on SME Access to Finance and the Role of Development Banks in Asia and the Pacific and Latin America Session 3 27 September 2017, Bangkok, Thailand Shigehiro Shinozaki Financial Sector Specialist (SME Finance) Sustainable Development and Climate Change Department Asian Development Bank This presentation was prepared under the author s responsibility. The views expressed here do not necessarily reflect the views or policies of ADB, its Board of Directors, or the governments they represent. ADB does not guarantee the accuracy of the data included in this presentation and accepts no responsibility for any consequences of their use.

2 Agenda I. ADB Strategies on SME Finance II. Challenges in Traditional Business Models III. Alternative Business Models in SME Finance IV. Policy Implications in Asia 2

3 ADB Strategies on SME Finance Financial Sector Operational Plan (May 2011) Articulate financial sector agendas of Strategy 2020and guide its implementation by ADB. Inclusive finance: (i) microfinance, (ii) housing finance, (iii) SME finance, and (iv) trade finance. Review of 2011 Financial Sector Operational Plan (May 2017) Retained focus: (i) finance sector development, (ii) inclusive finance, and (iii) infrastructure finance. Better use of emerging finance areas that have a crosscutting sectoral impact including digital, green, disaster risk, Islamic, and municipal finance. 3

4 ADB Strategies on SME Finance Share to Total Finance Sector Lending, Insurance and contractual savings 1% Money and capital markets 15% Infrastructure finance and investment funds 27% SME finance and leasing 15% Inclusive finance 12% Finance sector development 14% Housing finance 10% Trade finance 1% Banking systems and nonbank financial institutions 5% Central banking systems 0% SME Lending Operations, By Year % % % % % % Southeast Asia 2% By Region Regional 1% By Type South Asia 28% East Asia 24% Central & West Asia 45% Nonsovereign 27% Sovereign 73% 4

5 Challenges in Traditional Business Models Limited access to bank credit decelerates growth pace of SMEs. Both supply-side & demand-side factors intervene. 50 SME Loans, 2014 SME Loans to Total Loans (%) BAN SOL INO MON KAZ SRI IND FIJ PHI PRC MAL KOR THA Source: ADB Asia SME Finance Monitor PNG SME Loans to GDP (%) 5

6 Challenges in Traditional Business Models Basel III may negatively affect banks lending attitude to SMEs. Basel III requires banks to have tighter risk management as well as greater capital and liquidity. Resulting asset preference and deleveraging of banks could limit the availability of funding for SMEs. - Capital requirements - Liquidity framework - Leverage ratio framework 6

7 Challenges in Traditional Business Models Barriers to Accessing Financial Institutions No demand on SMEs SMEs' insufficient management Collateral/ guarantee 100% 80% 60% 40% 20% 0% Lending policy of FI Complicated procedures SMEs' lack of knowledge Exclusive lending attitude of FI Short loan term High lending rate PHI KAZ PNG SRI 7 PRC MAL KOR IND Notes: Percentage as the share of SMEs that answered yes plus somewhat yes from five scale scores (yes, somewhat yes, neutral, somewhat no, and no) about barriers to access finance. Valid samples: the Philippines (PHI): 63; Kazakhstan (KAZ): 98; Papua New Guinea (PNG): 19; Sri Lanka (SRI): 15; People s Republic of China (PRC): 303; Malaysia (MAL): 60; Republic of Korea (KOR): 28; India (IND):40. Source: Author s compilation.

8 Alternative Business Models in SME Finance Approaches to reduce supply-demand gap in SME finance Credit data infrastructure (credit bureau) Secured lending legal reform (collateral registry) - A wide-range of pledgeable assets as collateral covered by the secured transaction law. - A sound registration system on movable assets. - A speedy & efficient collateral enforcement mechanism. Policy measures affecting banks special units to SMEs Organized public credit guarantee schemes - Kredit Usaha Rakyat (KUR) in Indonesia. - Portfolio guarantee schemes (PGS) in Thailand. SME refinancing schemes - Refinancing facilities in Bangladesh (BB, ADB, JICA, & IDA Funds) 8

9 Alternative Business Models in SME Finance Develop nonbank finance industry Nonbank finance is a viable substitute for bank lending. Bank-MFI linkage. - ICICI Bank partnership model in India. Innovative product design Asset based finance Credit score based lending SME cluster financing Debtor-in-possession (DIP) financing Digital financial services SME capital markets 9

10 Alternative Business Models in SME Finance Digital Finance Approaches Over 700 million consumers use digital banking regularly in Asia. Emerging Asia: 28% of respondents used internet banking and 26% used banking services via smartphones in 2014, increasing trend but still low penetration. Digital payment, credit, savings, and insurance for small businesses. Digital Banking Penetration Digital Banking Channels 0% 50% 100% 100% Korea, Rep. of 96% Australia 96% 80% Singapore 94% Hong Kong, China 93% 60% Taipei,China Japan 92% 83% 40% China, People's Rep. of 57% Viet Nam 44% 20% Malaysia 41% Indonesia Thailand 19% 36% 0% Digital banking Internet banking Smartphone Digital banking Internet banking Smartphone 10 India 18% Developed Asia Emerging Asia Philippines 13% Source: Mckinsey&Company Digital Banking in Asia: What do customers really want?

11 Policy Implications in Asia Provide timely financing opportunities for SMEs while responding to their needs with flexibility and innovation. Poor access to finance limits the ability of SMEs to survive and grow. Limitations of bank lending under global financial uncertainty, e.g., possible negative impact of Basel III. No one-size-fits-all financing solution. Diversification of SME finance models is needed. Long-term funding needs increase as SMEs grow further. Potential for developing SME capital markets in Asia. The advent of fintech will bring more opportunities for SMEs to access low-cost financing. 11

12 Policy Implications in Asia New environment requires new financing solutions for SMEs. Economic integration and increasing FDI inflows to Asia stimulate the structural change of SME business models. A globalized economy will bring more SME internationalization and new financing demands from SMEs. Increased importance of supply chain finance & trade finance to involve SMEs in global value chains. Regulations as the enabler for new financial instruments. Flexible & holistic policy approaches for SME financing beyond measures already established. Support for SME bankability. Support for nonbank & market-based financing to SMEs. Consumer protection. 12

13 Thank you for your attention. For further questions: Shigehiro Shinozaki Financial Sector Specialist (SME Finance) Sustainable Development and Climate Change Department Asian Development Bank 13