SME lending key to growth and development
KATHMANDU, APR 14:
National Banking Training Institute (NBTI) and International Finance Corporation (IFC), a member of the World Bank Group, jointly organised a SME Finance Round Table discussion on how banks and financial institutions can tap the huge market potential in small and medium enterprises (SME) financing in Nepal.
The event focused on global and national perspectives on SME finance and explored the needs of small and medium enterprises. The speakers, consisting of senior banking and finance professionals and think tanks, highlighted the opportunities and challenges for banks in Nepal.
They also discussed the opportunities that lie in the SME Finance Forum, which is a collaborative knowledge sharing platform for data, research and best practices for SME finance and a part of the G-20’s Global Partnership for Financial Inclusion Framework.
Presentations and discussions were led by chief executive of Laxmi Bank Suman Joshi, head of SME Finance Forum, IFC Matthew Gamser, and CEO of NBTI Sanjib Subba. Regulators, CEOs and heads of SME departments of banks, and representatives from the SME sector took part in the discussions.
Lively discussions ensued around sharing ideas to accelerate financial inclusion for SMEs, and to set up a platform in Nepal for policy makers and financial institutions to share knowledge, encourage innovation and promote scaling-up of successful SME finance models.
The programme was undertaken by NBTI, a national level apex banking and finance academy established under the aegis of Nepal Bankers’ Association with support from Asian Development Bank and supported by SouthAsia Enterprise Development Facility, managed by IFC in partnership with the UK government and the Norwegian Agency for Development Cooperation.
“SME banking in Nepal has been more talk than action so far,” said Joshi. “Although many financial institutions are said to have targeted SME segment as a top business priority we have yet to see and feel the impact,” he said, adding lack of credible data is also a major challenge in terms of monitoring and measuring the impact.
“SME lending needs to be driven as any other retail product and the number of bank branches suggest there is a strong distribution infrastructure already in place. This platform which brings together bankers, regulators, donors and other stakeholders can be the foundation on which we can build a common strategy and approach for lending to SMEs for the benefit of the Nepali economy,” said Joshi.
About 111,000 small and medium enterprises are operating in Nepal, providing employment to 1.75 million people and accounting for 21.7 per cent of country’s gross domestic product. However, 25 per cent of these businesses do not have formal banking relations with financial institutions.
A recent IFC study estimated that there is a $2.5 billion untapped market for SME lending in Nepal. Bridging the huge funding gap in the small business sector would aid future growth and development of this sector which is a key engine of economic growth and a major source of employment for the labour force.
The event was part of NBTI’s mission to provide service to the banking sector that ensures rising standards of professional competence so that the banking sector operates effectively in an increasingly competitive market, and of IFC’s broader support to the financial sector in Nepal whereby its Access to Finance programme facilitates growth of SMEs in Nepal, helping enhance their financing options through a supportive financial infrastructure, including institutions, financial product development, and improved payment regulations.
Source: THT
