IFC Study Identifies Best Practices to Help Banks Improve Services for Small and Medium Enterprises
IFC has released the results of a global study that identifies best practices for banks that provide services to small and medium enterprises. The study, Benchmarking SME Banking Practices, was launched at the Felaban banking industry convention in Miami. It discusses trends in SME banking and is designed to help financial institutions improve their services to entrepreneurs and small businesses.
The IFC study highlights the growing importance of SME banking to participating banks. It also indicates how leading banks have managed to adapt their business models, organizations, and processes to serve their SME customers better and optimize the performance of their SME operations.
“The financial needs of smaller businesses are often underserved, which can be a constraint to their growth. The results of this study suggest that banks increasingly recognize the opportunities that SME banking offers,” said Ary Naim, IFC Senior Financial Specialist for Global Financial Markets. “The lessons revealed here should encourage more banks to enter the market and help financial institutions improve their banking services.”
The study, which began in 2005, benchmarks SME banking practices at 11 banks across developed and emerging markets. It identifies competition in corporate and retail segments as a key factor that drives banks to offer services to small businesses. It also shows that SME banking is proving to be profitable, generating a higher return on assets than total bank portfolios.
The study finds that senior management commitment and focus at the operational level are both crucial factors in the success of SME banking. It also emphasizes specialization among participating banks, which typically employ dedicated small business staff.
IFC will continue to work to establish best practice in SME banking in emerging markets by sharing the study with all banks seeking to benchmark and improve their practices.
IFC has recently launched a micro, small, and medium enterprise program in Latin America and the Caribbean, which is designed to support financial institutions through a combination of financial products and advisory services. These efforts will help the institutions expand their services to MSMEs, while being profitable.
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