NBTI, IFC explore ways to tap huge potential in small business financing

The bankers today dwelt on how banks and financial institutions can tap the huge market potential in small and medium enterprises financing in Nepal.

The speakers, consisting senior banking and finance professionals and think tanks, highlighted the opportunities and challenges for banks in Nepal during a Round Table discussion on small and medium enterprises (SMEs) finance organised jointly by National Banking Training Institute and the International Finance Corporation, a member of the World Bank Group, in the Valley today.

The event focused on global and national perspectives on SMEs finance and explored the needs of small and medium enterprises.
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.

“SME banking in Nepal has been more talk than action so far,” said chief executive of Laxmi Bank Suman Joshi, on the occasion.

“Although many financial institutions are said to have targeted the SME segment as a top business priority we have yet to see and feel the impact,” he said, adding that 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.”
The 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 economy, he added.

Joshi, head of SME Finance Forum at IFC Matthew Gamser and chief executive of NBTI Sanjib Subba led the presentations and discussions sessions.

The regulators, chief executives and head of SME departments of banks, and representatives from the SME sector took part in the 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.

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 the country’s GDP.  However, 25 per cent of the businesses do not have formal banking relations with financial institutions.
A recent IFC study estimated that there is $2.5 billion untapped market for small and medium enterprise 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 labor force.
The event was a 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 small and medium enterprises in Nepal, helping enhance their financing options through a supportive financial infrastructure, including institutions, financial product development, and improved payment regulations.
The programme was undertaken by NBTI, a national level apex banking and finance academy established under the aegis of Nepal Bankers´ Association (NBA) 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.