Non-Financial Support Services to Banks and SMEs: ITC’s ResponseAfDB - EMRC Forum6-7 June, 2011Lisbon, PortugalMs. Angela Strachan, Chief, Business Environment SectionDivision of Business and Institutional Support, ITC
International Trade Centre (ITC)1. A joint technical cooperation agency of the UN and the WTO - created in 19642. Funding – parent bodies + donors3. Priority countries - LDCS, LLDCS, Small and Vulnerable Economies and Countries in Transition4. Priority markets - exporting and export ready SMEs and MSMEs5. Priority interests - agriculture, women, regional (Africa, Asia et al)
ITC Builds SME capacities on three levels Trade Support Institutions Trade Policy EnterprisesFormulate strategies Develop and implement for exports Strengthen strategies SME capacities Advise following policymakers Prepare for exports Establish an adequate ITC criteria institutional frameworkConclude commercial Improve transactions networks Build capacity for trade negotiations Export Strategy Trade Support Institution Exporter Competitiveness Business and Trade Policy Strengthening
How ITC assists MSMEs and partnerswith Financial Institutions (FIs) to facilitate access to finance
Strategy in Response to SME FinancialNeeds – 4 Pillars 1- Strengthening the overall 2- Enhancing financial institutions’ management capacities of SME understanding of SME needs and risksmanagers, in particular in financial management 3- Building better links between 4- Broadening the range of financialinternational and regional financial services targeting SMEs institutions (e.g. AfDB) and commercial banks
Trade Finance for SMEs Approach ITC SME Competence Building Trade-Related Technical LOANCOM Assistance Services & other tools & Finance SMEs Private Sector Development SME Financing Regional & CommercialInternational Banks & Micro Financial Credit & Guarantee Lines FinancialOrganizations Institutions
How can ITC help (M)SMEs Access Finance? 1. Building the Capacity of VC 2.Partnering with FIs to facilitateMSMEs in Financial management access of MSMEs to Financial and services services Analyzing and identifying the most promising Analyzing and mapping value chains in financial institutions interested in increasing their the targeted sector to identify the most MSME portfolios promising and the respective financial needs of actors Providing risk mitigation methodology tailored to the specificities of the sector and the parameters of the FIs Counseling and coaching MSMEs, cooperatives, associations before, Negotiating a credit line/guaranty funds with a during and after the loans development agency/bank (e.g. AFD) to cover the loans granted to MSMEs Facilitating a close partnership between trade Assisting value chain actors in making support institutions (ABePEC, ZDA) and FIs bankable business plans (BOA,SGBBE, Investrust) for an appropriate response to MSME financial needs.
Building the Capacity of VC MSMEs in Financial management and services Analyzing and mapping value chains to identify the most promising chains and the respective financial needs of actors- Following a pineapple value chain analysis in Benin, those with good export potential toMaghreb and neighboring countries (Nigeria, Niger, Burkina Faso, Senegal) were selected Producers Processors ExportersEnhancing financial management skills of TSIs, BDS providers and MSMEs- In Zambia 16 BDS providers trained and certified by ITC to provide coaching to 70 MSMEs- In Benin, ABePEC (a TSI) has been provided with financial management self-checkers and 100associations, cooperatives, micro enterprises are provided coaching by 34 counselors Assisting value chain MSMEs in making bankable business plans- SME Company ABC Ltd in Zambia was provided coaching by Mr. Sebastian Kapalu (a trained BDSprovider). He undertook a business diagnostics and is helping them make a bankable business plan
Partnering with FIs to facilitate access of MSMEs to Financial servicesAnalyzing and identifying the most promising financial institutions interested in increasing their MSME portfoliosA thorough analysis of financial institutions in Benin helped to select Bank of Africa (BOA)and Société Générale des Banque du Bénin (SGBBE) who are interested to increase theirSME portfolio and in the agricultural sector (pineapple) Providing to the FI a risk mitigation methodologyA risk mitigation methodology has been tailored to the specificities of the pineapple sectorand the parameters of BOA and SGBBE in Benin and Investrust for various sectors in Zambia Negotiating a credit line / guarantee funds with a development agency/bank In Benin, a partnership has been created with the French AFD for a credit line/guaranty funds for BOA and SGBBE to cover loans granted to associations, cooperatives and micro enterprises Facilitating a close partnership between TSIs and FIs In Benin and Zambia, ITC has facilitated a close partnership between TSIs (ABePEC and ZDA) and FIs (BOA, SGBBE and Investrust) for an appropriate response to MSME financial needs
Expected OutcomesThe ITC approach can be considered as a holistic one directed exclusivelyto enterprise competiveness. Through its Trade Finance for SMEsprogram, the following concrete outputs are achieved at SME, TSI andBank level:☺ SMEs have better access to finance and could achieve a low rate of default;☺ Better quality of business plans submitted to the banks;☺ Capacity building of all the actors of the value chain of a specific sector;☺ Stronger trade support institutions delivering better coaching services to their members;☺ Reducing the knowledge and communication gap between the SMEs and the banks.
Standard Delivery Mode Needs assessment in the beneficiary country The programme is usually delivered in an integrated Identification and MOU with a package. national partner (Trade Support Institution) •Average duration: 18 months Identification and MOU with a commercial bank SMEs have better access to finance Identification and training of national counsellors Coaching SMEs before, during after the loan
Alternative Delivery Mode Case 1 Training counsellors The programme can be delivered in an à la carte approach to respond to the OR client’s specific needs. Case 2 Training and certifying counsellors + work with SMEs OR SMEs have improved access to finance. Case 3 Equipping a TSI with financial management self-checkers OR Case 4 Equipping a financial institution with the risk assessment/management software (LoanCom)
Ongoing/Pipeline Projects Benin: Enhancing Pineapple Exports Project funded by Finland; Zambia: AfDB funded project to promote the private sector; Asia and Pacific: ADFIAP/ITC/ITD Regional SME Finance and Knowledge Centre; DR Congo: UNDP funded program to strengthen the financial management capabilities of the TSIs and SME associations; Uganda: Netherlands Trust Funds (NTF 2) Project in the coffee sector; Senegal: Netherlands Trust Funds (NTF 2) Project to promote the mango sector.
Tailor-made Tools for MSMEs, TSIs, BDS Providers and Financial Institutions
Credit Scoring Software (LOANCOM) for Financial Institutions The methodology Good management competencies (general and financial) improve the quality of proposals from SMEs seeking loans for trade and export from financial institutions; Financial institutions need to overcome problems of understanding SMEs businesses and of assessing the risks of dealing with SMEs; Helping financial institutions to measure and record general and financial management competencies as well as conventional credit risk assessment criteria. The LOANCOM Process: Customizing LOANCOM application to Specific requirements of partner institutions; LOANCOM software generates specific recommendations allowing the FI to define appropriate risk management processes corresponding to specific loan requests; Delivering training programmes for the loan officers of the partner institutions.
Self-checkers for TSIs and SMEs• Loan Calculator and Amortization Table• Financial Management Self-Checker• How to Approach Banks• SME Audit Tool• Stethoscope For more information: http://www.intracen.org/exporters/obtaining-export-credits/
ITC’s Trade Finance Training Modules1. Business Diagnostics;2. How to assess SMEs’ financial needs;3. Alternative sources of finance for SMEs;4. Developing bankable proposals; (incl. sample loan applications, business plans);5. Bookkeeping and cash flow management;6. Analyzing financial statements;7. Budgeting and forecasting;8. Payment mechanisms and risk mitigation in international trade;9. Good governance and Corporate responsibility;10. Gender issues in SME Development.
Examples of Trade Finance PublicationsHow to Access Finance: A guide for SME Managers; Islamic Banking Handbook and User Guide for SMEs; Business Navigator on e-Finance for SME Exporters in Developing Countries;
Examples of Trade Finance Publications Financing Service Exports; Foreign Exchange Derivatives and Risk Management in Developing Countries; How to Approach Banks: A Guide to Short term Trade Credit; Trade Finance: A legal Guide for Cross-Border transactions.
Added products, services…… Introduction of new suite of Access to Finance solutions, tools and services …. • LoanCom ++ • Transaction based financing product Enhanced use of mobile technology Strategic partnerships with wider range of TSIs – (insurance companies, financial industry specialists)
Thank you!For more information please contact: Roger Megelas firstname.lastname@example.org Yaya Ouattara email@example.com or firstname.lastname@example.org