E-Finance for SMEs - THE PATH

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Expert Meeting on Improving Competitiveness
ofSMEs in Developing Countries The Role of
Finance, including E-Finance, to enhance
enterprise developmentGeneva, Oct 22 - 24,
2001E-finance for SMEsTHE PATH
A presentation by Sanjay Guglani
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SMEs

• Dominant contributors to GDP
• Key employment engines
• Enhance National Competitiveness
• Commercial Banks, Venture Capitalists,
  Governments... initiatives
• E-payment gateways platforms

Wow!
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Do we have reliable data on SMEs ?
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The Foundation

• Authentic exhaustive database
• Collation problems
• Spread Diversity
• Income under-reporting
• Accounting / Planning
• Cost of administration
• Solution
• Involve SME associations
• Community Ownership!

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e-Culture
Comradeship is the key PULL strategies Multi-tier
data entry Authentication normalization Universa
l Identification Mandatory info. collation
updation Online trade fairs trusted digital mkt
place Thats how!
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Who will bell the cat?
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Impact of e-finance on banks net margins(net
interest income)
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
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e-Trade

• 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!

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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.
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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!
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HongKong TradeNet
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Desired govt. initiatives for e-finance
Policy Area Current New
paradigm paradigm Creating an enabling
environment Telecom security framework, PKI
Info., privacy contractual framework
Institution specific financial
laws Market infrastructure
Consumer, investor institutional
risks Consumer investor protection
Prudential regulation Markets
- functioning, performance risks Competition
policy Functioning,
transparency, liquidity... Forms of
government intervention Banking, micro
lending,direct credit Information
prov. collateral inst. Use of
existing infrastructure
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E-finance for SMEs
Short term funding Quasi-factoring Medium term
funding Dematerialization standardization of
debt paper (mortgage) Risk Capital Online
venture capital processing monitoring
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A Snap-Shot

• Stage Target
• Foundation Live database
• e-Culture Unique identity
• e-Trade Credit history / EDI
• e-Finance No financial constraint
• Immediate Action Plan
• Leverage SME associations
• Open LSE info-systems relating to SMEs to
  financial community.

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Thank-you
Contact details Sanjay Guglani Saksham
Financial Services (P) Ltd. K-101 (3rdFlr) Lajpat
Nagar-2 New Delhi - 110024. INDIA Tel
91-11-6914959/69/79 Mobile [phone] Emai
l guglani_at_VCline.com Website www.VCline.com