eBusiness Weekly
Kudzai M. Mubaiwa
Now that we have a dedicated Women’s Bank and a dedicated Youth Bank (Empower Bank) — we look forward to getting a bank exclusive to Small to Medium Enterprises.
There are certain demographies unfortunately not covered by either of the two recently launched financial institutions, and yet they are equally important players in the small business space.
More importantly we need funding mechanisms that work to support any entrepreneur on the basis of the quality of their idea rather than based on only the gender or age disaggregation.
A successful bank for small business owners must, in my view, have the following important features: Holistic support, a strong field element, flexible funding products, a peer community, linkages with centres of innovation and appropriate staff.
In a past paper in which I reviewed the then most recent youth fund in 2014, I suggested the following pointers:
The first step in the funding process must be assessment of the entrepreneurs.
Profiling is important, and preferably, selection must be made based on the business potential of the candidates.
Capacity building for entrepreneurship can then be provided through training.
Sufficient loan amounts must be given to young people.
These can first be small amounts to allow a pilot for Greenfield projects, and if for Brownfield projects, the promoter must not receive less than what will make the project viable.
Consistent monitoring and evaluation is required. This can be achieved by using dedicated staff for a personal banking approach that includes on-going advisory services throughout the life-cycle of the business. This implies that the structure of the fund is such that personnel are skilled in dealing with youth and micro-enterprises, which is a role over and above just disbursing funds.
In addition strong business support may be required, such as investment in mentoring and linking youth to markets. This necessitates creating and leveraging on an ecosystem comprising training and technical institutions, trade and commercial organisations.
The end game must be to graduate youth fund recipients into mainstream banking. Top performers should then naturally be introduced into the SME departments of mainstream banks where they can access bigger loans.
It remains my considered view that small business owners require full support rather than an approach that merely throws money at problems.
This is of no use if they do not know what to do with it (lacking financial literacy skills) — or how best to produce a high quality product/service (technical skills) — or how to grow their business organically in a market.
Funding is just one piece of a puzzle, several other moving pieces are engrafted for business success. Much as it may seem like conflict of interest, banks are better off ensuring that their loan beneficiaries have first received some kind of training in each of the three respects — through an internal programme, or a close feeder relationship with other innovation spaces.
Small business owners tend to be individuals and families or friends championing their own cause and running a very personal hustle.
Many of them will not have the skills and sophistication to correctly complete a loan form and justify their need for working capital or capital expenditure funds.
The SME bank that will win will not be big on branches, no matter how fancy or huge — to host people in, but will incline towards taking the bank to the people, to the field, to appreciate their work first.
Brick and mortar will go out of fashion anyway, so the approach must be that which appreciates that people want banking services but not so much banks. Banking officers must go to where they are and provide on-site services. This would work with the next point — flexible banking products.
Currently, banks have rigid services that are summarised on a single page “banking conditions at such and such a date” with fixed interest percentages, and requirements/steps to accessing funds.
Most small business owners will not be confident to question an existing structure, or to highlight that it does not match their business cycles. This must stop because it sets both the bank and it’s client up to fail.
However, when a loans officer becomes a field officer who understands the business intimately they cease to become an agent for accessing funds only but an important stakeholder in the business growth path.
They will ensure the business only receives what it needs in the moment such that it can thrive, and in turn return what is due when due.
Business is a long hard road that requires support not only from technical people, but from like-minded individuals.
The SME bank of the future must create a common community for its clients, spaces where they can interact and cross pollinate ideas — physically as well as virtually.
In the old world, banks would prefer absolute secrecy, in the new, they would appreciate the opportunity to co create, knowing that engagement leads to loyalty both ends and meaningful, long term relationships.
Monthly meet-ups — socially or for training will make a great difference and allowing client interfaces will stir partnerships and mentoring between businesses at different stages.
It will also be important to realise that there already exist similar spaces where entrepreneurs and innovators meets — the many innovation centres, business incubation centres and the tech hubs and co-working spaces.
In the perfect world, these would be the natural feeder centres for a bank, places that already house potential clients and ensure they have an adequate foundation to build upon.
Last but not least a great SME bank must overall be manned by great staff, motivated individuals that are wired to work with small business owners, rather than creating unnecessary hoops for them to jump through.
They should be deliberate about listening, co creation, flexibility and efficiency in processing the required amounts in full and on time once the process kicks in and they must have a knack for appreciating novel ideas, especially where proof of concept has been established. Funding must always go in the direction of the best ideas, not just demographics; righting a past structural wrong.
Hopefully, a bank like we have described above will see the light of day soon — either as a new creation or a present one’s reformation.
Feedback: Twitter @kumub, Email [email protected]
