IFC Report provides guidelines for profitable SME Banking in developing countries

A new publication by IFC, ME Banking Knowledge Guide will help the banking industry in developing countries design successful strategies and products for small and medium enterprises, key drivers for job creation and economic growth.

The publication outlines leading success factors for profitable SME banking operations and provides practical steps that bankers in the developing world can follow to implement a robust SME banking strategy. Through detailed advice in this guide, IFC shows how financial services providers can profitably develop or expand their SME operations and increase access to financial services for these economically important small and medium enterprises.

“SMEs in emerging markets are a critical development challenge, but also a sizable untapped opportunity for the private financial industry.” said Peer Stein, IFC Manager for Access to Finance Advisory Services. “This guide is very practical for any financial institution looking for new ways to develop its client base.”

Small and medium enterprises account for more than 90 percent of registered companies in the world, and they represent a large and economically important sector in nearly every country. They are a major driver for economic growth and job creation, and their role will be even more important in the post-crisis period. Yet these companies often lack access to financial products and services, especially in developing countries.

Many small businesses rely on informal sources of capital to meet their financing needs. For SMEs to grow, they need access to financial services and such access historically has been severely constrained because of the perception that SMEs present high credit risk and high services costs.

However, according to the new guide, leading banks have demonstrated success in reaching this market. And with the right focus, specific products, and a better use of innovative lending technologies, banks can have a thriving SME banking operation.

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