EMPOWERING SMES

TO TAKE THE NEXT BIG STEP FOSTERING ACCESS TO FINANCE TECHNOLOGIES IN

PAKISTAN

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“[SMEs] often struggle to get loans from banks which see

them as risky (costly opaque) investments (and which often

don’t offer adapted services). Red tape makes it hard for them to

get crucial permits and licenses. Commercial disputes with other

firms can drain their finances. And many entrepreneurs lack

transparent governance and records, basic financial and

strategic planning skills. As a result, roughly 95 percent of

SMEs will never employ more than five people and

only 4 percent survive to their 25th birthday.” “Hitting it

Big”p.14, IFC Publication: Voices, How IFC is changing lives in Pakistan”

Less then 40% of the 3 million SMEs in Pakistan have banking relationships, only 7% avail financing

Enabling

environment Access to

finance

Access to

markets Access to

skills

Inflation,

security,

natural

disaster, energy

shortage

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Access to finance

Access to markets

Enabling environment

Skills building

To empower SMEs in Pakistan, the most important challenges need to be addressed

• Doing Business ranking,

• SME banking diagnostic

• SME banking

conferences/programs with SBP

• Settle commercial disputes

quickly – and inexpensively

through mediation, alternative

dispute resolution centers in

Karachi and Lahore

• Debt resolution and solvency law

reform

Through financial institutions

• Enhance financial services to SMEs

• risk sharing facilities

• trade finance guarantees to support small

businesses

• advisory to build its capacities to lend to SMEs:

reach new segments (women), enhance

operations, risk mngt, loan workout, beyond

lending products, non-financial services for SME

clients

• Corporate governance

• Integration in IFC investment

client value chain and market

linkages

• Networking component of Non-

financial services strategy of

financial institutions

Investments

and Advisory

• develop SME Skills based on need

(instructional design/

customizable content,

methodology, e-learning, etc.)

• Leverage existing resources

• Online tools

Source: Bank Financing for SMEs around the World.

A Study by The World Bank 2008

8%

49%

16%

4% 9%

Collateral

Financial assessment of the business Firm's credit history with the bank

Firm's credit history from a history from a credit registry

Criteria banks use to make small business loans

What does a Bank look at in your loan application

Are you ready? Check-list

Attitude

Informed: up to

date/ anticipating

market trends

Cooperative: Ready

to share information

about the business

Skills

Leadership

Strategic planning

Financial

management

Documents

Business plan

Financial statements

Bank specific

documents

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IFC

Pro

duct

Off

eri

ngs

Strategic Advisory

Business Advisory

Risk & CG Advisory

Specialist Products

Advisory

Diagnostics/Benchmarking

Market assessments & sizing

Business/strategic planning

Strategic segmentation

Capacity Building

Sales effectiveness

Customer management

Product optimization

SME Credit reengineering

Risk Mgt FMWK development

Risk scoring

EWIs and Portfolio mgt

Capital management

Women Markets

Agrifinance

Mobile banking

Leasing

Energy efficiency

Branch/Delivery

redesign

Mobile Banking

Organization

realignment

ALM & market risk

NPL and collections

Corporate governance

Islamic Finance

Trade finance

Non financial advisory

Business Edge

SME Toolkit

Our Aim:

Assist Banks in

recognizing and

then tapping the

opportunities in the

SME/SEF/WM/Agri

segment in a

profitable and

sustainable manner

Raise awareness of

best practices in

SME Banking

Build capacity of

banks that are

committed to

expanding services

to SMEs and other

underserved

market segments

IFC’s integrated set of products and services offered to

FIs/ Banks to increase outreach to SMEs

Executed some landmark assignments while addressing key market

failures faced by SMEs

Bank

Muscat

Climate

Change

Habib

Bank

Become “Trusted Advisor” in Core Competencies Address Key Market Failures

Gender

BOP

BCP

Islamic

Finance

Bank

Muscat

BLC

BOP

Bank Etihad

Ejara

Fransabank

Tamweelcom

BLF

Al Rajhi

IFC’s relationship since 2006 (investment)

IFC helped BM launch its SME business in 2006

IFC was inducted again in 2012 to help scaling

up its SME business

1st bank in MENA to launch Women’s

market initiative with IFC’s

assistance.

1st bank in GCC to launch Women’s

market initiative with IFC’s

assistance.

Project underway, it would be the

1st bank to venture in WM in

Palestine.

SME/WIN Project just started, it

would be the 1st bank to offer WM in

Jordan.

One of the largest Islamic banks in

the world, SME Banking advisory

project

HBL is key strategic IFC client since 2006;

In 2011, IFC entered into an SME Banking

advisory agreement with HBL

Client’s positive experience led to additional

engagements in Women’s Markets & Agri

Finance

IS/AS/SEF Project underway,

First leasing SEF project in Jordan,

First SEF Bank project in MENA.

strong development results

First MFI SEF project in MENA, in

addition to IS and CG/RM

IFC key relationship (investment)

IFC AS was engaged in 2009 in RM/CG capacity

building with BoP

IFC advisory services expanded into offering

SME Banking and Women’s Market intervention

in 2013

IFC and the AMC collectively investment.

Risk Management advisory assignment was

carried out in the past with the client

A new assignment for VSE banking capacity

building scheduled to commence soon

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Institutio

n building UBI Institutional capacity building

project, USD 2.5m (60% cash fees) in

Iraq

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• Organization of

training workshops /

seminars on:

(physical-online-mobile-

blended)

- Business planning

- Financial

management

- Accounting

- Taxation

- Trade & Export

- Policies &

regulations

- Government

schemes

- Sales & Marketing

• Web-based /

online platforms

and toolkits

• Call centers

• Publications

related to various

industries,

economic

condition of

target export

markets etc.

• TV /radio/ print

media

• Advice by in-

house

and/outsourced

consultants/ment

ors on:

- Business (e.g

business

plan)

- Operational

- Financial (e.g

account

management, tax )

• Trade fairs /

SME expos

• Road shows

• Discounted

buying

• Business

Clubs/SME

Clubs

• Excellence

awards

Networking Training/Capacity

Development Information

Dissemination

Consultancy / Mentoring

Improving bankability of SMEs (IFC non financial services tailored advisory to FIs/Banks)

• diagnostic,

• strategy

development

• Developing

tailored

advisory

solutions for

SME clients

• Delivering

advisory

solutions

• Impact

assessment

Non-Financial Advisory

• Expand distribution network from 100+ today to 4,000

by 2018

• Increase sales and efficiency

• Improve loyalty of Distributor Entrepreneurs (DEs)

Client Needs

Investment Client

In-depth analysis of the value chain with

focus on distribution networks:

• Assessment of distribution chains

• Develop strategy and action plan

DE development program:

• Implement skills development program

• Implement loyalty enhancement program

and develop point of sales advantages

• Work with FIG to support access to finance

• Scale from five sites and 100+

distribution entrepreneurs

(DEs) today to over 20

community sites reaching 800

DEs by end of 2015, and 100

sites and 4,000 DEs by end of

2018

Support by IFC Results

Integrating SME distributors in the value chain

• Improve loyalty and competency of retail network

and increase sales

• Integrate CSR into core business strategy &

increase revenues

• Retailer development program designed to

build the competence of small-scale

retailers in skills critical for day-to-day

management of their businesses and sales of

Dialog products:

• Delivered by IFC certified local training provider

• Training in customer service, networking skills,

social entrepreneurship, display techniques,

branding skills, productivity practices, cash flow

management, break-even analysis and stock

management.

• 8,000 micro and small retailers have been trained across the country through 400 workshops. Program assessments show significant impact on revenues, loyalty, and management skills

• $5.7 million increase in Dialog’s revenues across all geographic locations covered by the program

Client Needs

Investment Client

Integrating SME distributors in the value chain

Support by IFC Results

• Established mediation centers: Karachi

Centre for Dispute Resolution & Dispute

Resolution Centre at LCCI.

• Introduced global best practices of

mediation of commercial disputes

• Training of accredited mediators (141) and

Master trainers (23)

• Judges trained in Sindh (461)

• Close collaboration with Chambers of

Commerce, Banks, Judiciary, Government

and SMEDA

1,222 cases were mediated in Karachi

504 cases were mediated in Lahore

Released assets amounting to US$ 28.9

million.

Private sector savings amounted to US$

58.2 million.

Save money – settle your SME commercial

disputes quickly through mediation

Support by IFC Results

Alternate Dispute

Resolution

• Build the capacity of training providers

(19)

• Built the capacity of trainers (359)

• Made high quality management training

available in the local language (50

manuals in Urdu)

• Close collaboration with Chambers of

Commerce, trade bodies, business

associations and industrial estates

• 12,213 individuals have been

trained

• 2,419 women have been trained

Impact results of business management

trainings:

• (94% noted positive impact of the

trainings on their respective MSMEs,

• 81 % noted increase in their sales

revenue,

• 75 % noted increase in profitability

and;

• 66% noted increase in customer

satisfaction.

Improving the performance of SMEs

Support by IFC Results

IFC Business Edge

Reduce the SME energy gap: Lighting Pakistan: Catalyzing the market for off-grid lighting in Pakistan

There are 60 million Pakistani’s living off-grid without safe and clean lighting

Lighting Pakistan works as a

catalyst to make quality off-grid

lighting products accessible to

energy-poor households in Pakistan.

The program is building off

successful projects in Africa, India

and the Pacific.

Lighting Pakistan lowers entry

barriers to the off grid lighting

market, from the design of lighting

products to their production and

distribution.

THANK YOU

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