No economy can boom without a healthy mix of SMEs, but they are often left to fend for themselves when it comes to funding in times of crisis. SMEs have suffered outsized impact from COVID-19 but have not received corresponding loan consideration from big banks. How can this be turned around so that SMEs will not just survive but thrive?
Relationship lending involves regular contacts between a bank and a customer over time, so the lender can understand the customer well enough to provide a tailored credit solution with little risk. During times of crisis, relationship lending is mutually beneficial and may be increasingly employed as the pandemic’s full impact transpires.
Financial inclusion has not yet been fully achieved, especially in developing countries, leading to lost prosperity not only for individuals and SMEs but economies. In Nigeria, FirstBank has tackled the problem through innovative measures, including its agent banking network Firstmonie, which succeeds in including the previously excluded.
It’s no secret that SMEs play a significant role in the UK economy. As of 2020, there are 5.9 million SMEs in the UK, contributing about 50% of its GDP. It goes without saying that the pandemic has put SMEs in a precarious position. Empowering them to grow again will be vital to the UK’s recovery – they hold the key to our GDP, the job market and to their communities.
Small and medium-sized businesses need reliable lenders, but they are often viewed warily by credit institutions. That could provide an opportunity for Big tech that use alternative data to credit score SMEs and help them optimise their financial performance. However, it is banks that will be the future of SME funding because they have financial data, can guarantee data privacy and have no conflicts of interest with their clients.
In the old days, banks could work independently of others providing financial services, but not anymore. As the world becomes more interconnected, banks are being drawn into emerging ecosystems comprised of old and new players. Cooperation and integration are the names of the game for both incumbents and newcomers such as fintechs and virtual banks, but putting the blocks in place to build the infrastructure is easier said than done.
Traditional banking hasn’t worked well in some areas of the world, including sub-Saharan Africa, where a large percentage of the population has been financially underserviced. New, innovative fintechs have been only too happy and qualified to fill the void. By expanding access, fintechs are promoting economic and social growth in the region, especially in high-tech hubs South Africa and Kenya, which are setting an example for others to follow.
No one can deny that around the world, bank branches are shutting their doors, alarming consumer advocates. But who is mainly behind the trend away from brick and mortar and toward digital? As research proves, the prime mover is the customer, whose changing demands and expectations are causing the shift. Fortunately, today’s two main banking channels are not mutually exclusive; they can work successfully in tandem.
An efficient financial sector is central to maximizing an economy’s potential by helping it to make optimal and longer-term investments. Developing countries face a chicken and egg dilemma when it comes to financing, because it is hard to have efficient financial services without companies that can make good use of funding. This article examines how practical intervention to build the capacity of financial services through professional training will boost developing countries.
Innovations in technology have transformed the way we bank in our personal lives. Now, as long as we have a Wi-Fi connection and a mobile phone, tablet or laptop to hand, we are able to check our balances, make payments and transfer money anywhere at any time.