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SMEs Financing & Financial Policy
SET AUNG20th December 2014
Picture sources: blogs.sap.com, pixgood.com
SMEs Problems
• Multidimensional problems (not just access to finance)– Access to market– Quality and productivity– Access to information– Others
• More of less the same in many developing countries
www.dreamstime.com
Why is SMEs Financing Difficult
Lack of information
Lack of Collaterals
Lack of financial sources and products
Lack of accessibility
Lack of knowledge and capacity
Picture sources: clipartpanda.com, clker.com, ibom.biz, hackerspace.govhack.org, leansystemsinstitute.com
Traditional Financing
Others’ moneyOthers’ money
Own moneyOwn
money
EquityEquity DebtDebt
Bank loansBank loans
BondsBonds
Investment Vs Financing
Investors Companies
Stocks
Investment Financing
ProjectsProjects
Inve
stm
entBonds
Investors’ Side• Direct equity investment at stock exchanges (e.g.
AIM)
• Portfolio investments– Passive investments
• Small/Large Index• Growth/Value Index
– Active investments• Market timing
• Investments in fixed-income securities (e.g. corporate bonds, debentures)
Companies’ Side
• Trade-off theory of capital structure
• Various sources of debt financing– Banks– Venture capital/ Angel financing– Trade finance (Factoring, discounting)– Leasing– Bonds– Crowd funding
What is Needed for SMEs Financing
Information- Credit Bureau system- Banks’ database system- Collateral registration
- Credit Bureau system- Banks’ database system- Collateral registration
Financial Products & Sources
- Banks and NBFIs (Crowd funding in future?)- Factoring, leasing, etc.- SME Fund, Credit line, Guarantee scheme
- Banks and NBFIs (Crowd funding in future?)- Factoring, leasing, etc.- SME Fund, Credit line, Guarantee scheme
- Bank branches (Mobile banking/payment)- Bank branches (Mobile banking/payment)Accessibility
Lack of knowledge & capacity - Training & awareness (Automated advice?)- Training & awareness (Automated advice?)
Collateral - Movable assets registry- Movable assets registry
Impacts on SMEs
• Impact of inflation/lowflation/deflation
• Impact of high interest rate (how can it be mitigated?) & credit crunch
• Impact of high risk/ high return concept
Impacts on SMEs (Cont’d)
• Impact of FDIs to change strategy– SMEs Vs. SIs– How to take advantage of AEC
• Impacts of the exchange rate– Borrowing in FX– Current situation of offshore loans– 1997 financial crisis
Near-Future Positive Impacts on SMEs
• Once-Stop-Service-Centers
• Loans from policy banks (including two-step-loans)– SMEs may still get denied (Vietnam’s case)
• Credit guarantee system
• Credit Bureau system/ Collateral registration
Future Positive Impact (Cont’d)
• Trade finance (factoring, discounting, leasing, etc., by banks and NBFIs)
• Payments and e-Commerce
• Forwards & Swaps for hedging FX risk