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Expert Meeting on Improving Competitiveness ofSMEs in Developing Countries:
The Role of Finance, including E-Finance, to enhance enterprise development
Geneva, Oct 22 - 24, 2001
E-finance for SMEsTHE PATH
A presentation by:
Sanjay Guglani
• Dominant contributors to GDP• Key employment engines• Enhance National Competitiveness
� Commercial Banks, Venture Capitalists, Governments... initiatives
� E-payment gateways & platforms
SMEs
Wow!
Do we have reliable
data on SMEs ?
Authentic & exhaustive database
Collation problems:– Spread & Diversity– Income under-reporting– Accounting / Planning– Cost of administration
Solution:– Involve SME associations
Community Ownership!
The Foundation
Comradeship is the key
PULL strategies
Multi-tier data entry
Authentication & normalization
Universal Identification
Mandatory info. collation & updation
Online trade fairs & trusted digital mkt place
That’s how!
e-Culture
Who will bell
the cat?
Economies Net margin
1997 2005 2010
Developed nations average 2.34 1.96 1.69
Emerging markets average 4.39 3.85 2.50
Brazil 7.76 6.63 3.63
Czech Republic 3.04 2.77 2.07
Hong Kong, China 2.90 2.26 1.73
Mexico 3.64 3.26 2.27
Russia 4.79 4.21 2.65
South Africa 4.96 4.34 2.70
Turkey 11.17 9.41 4.75
Impact of e-finance on banks’ net margins(net interest income)
� Lack of credit scores� Opening LSE info-systems� EDI back-bone� Digital storage certificates� Dynamic working capital allocation
– Use SME associations– Government-sponsored Trade-Nets– Smart Cards
Yes!
e-Trade
Telco loss 100 m projected ‘06: 900 m USD
Material costs down by 40 m Inventory down to 57 days (from 75 days)
Tata AutoComp: 12 suppliers, 40 OEMs, 330 component cos. & numerous SMEs.
Many of these SMEs with no access to any formal channel of financing
Telco info-net
JIT - SCM - Transaction history
Financial sector provide voluntary quotes rates for discounting Tata Engg bills at 20 - 25% lower rates without bothering of recipient SME, collateral or accounts
Turnaround leveraging SME relationship
Funding sans collateral /accounts!
HongKong TradeNet
Policy Area Current New paradigm paradigm
Creating an enabling environmentTelecom & security framework, PKI$ $$$Info., privacy & contractual framework $$ $$$$Institution specific financial laws $$$$ $$$Market infrastructure $$$$ $$$
Consumer, investor & institutional risksConsumer & investor protection $$$ $$$$Prudential regulation $$$$ $$$
Markets - functioning, performance & risksCompetition policy $$ $$$$Functioning, transparency, liquidity... $$$ $$$$
Forms of government interventionBanking, micro lending,direct credit $$$ $$Information prov. & collateral inst. $$$ $$$$Use of existing infrastructure $$$ $$$$
Desired govt. initiatives for e-finance
Short term funding:
Quasi-factoring…
Medium term funding:Dematerialization & standardization
of debt paper (mortgage)
Risk Capital:
Online venture capital processing & monitoring
E-finance for SMEs
Stage TargetFoundation “Live” database e-Culture Unique identitye-Trade Credit history / EDIe-Finance No financial
constraint
Immediate Action Plan– Leverage SME associations– Open LSE info-systems relating to
SMEs to financial community.
A Snap-Shot
Contact details:
Sanjay GuglaniSaksham Financial Services (P) Ltd.K-101 (3rdFlr) Lajpat Nagar-2New Delhi - 110024. INDIATel # +91-11-6914959/69/79Mobile # +91-98101-98869Email: [email protected]: www.VCline.com
Thank-you
