India Development Solutions

GSME Newsletter October 2009

Nigeria: High Microfinance Interest Rates Cause Loan Defaults

There is increasing fear that the high default rate among fund borrowers from the microfinance banks may soon ruin the nascent banking institutions, The Guardian investigation has revealed.

High interest charged by the microfinance banks has been discovered to be the reason behind the alarming default. A microfinance loan is a facility granted by a microfinance bank to an individual or a group of borrowers, whose principal source of income is derived from business activities involving the production or sale of goods and services.

The maximum principal amount stipulated by the Central Bank of Nigeria (CBN) guidelines that a microfinance bank can grant to a client is N500,000 and this may be reviewed from time to time by the apex bank.

By practice, a microfinance loan is granted to the customers of microfinance banks, such as peasant farmers, artisans, fishermen, women, senior citizens and non-salaried workers in the formal and informal sectors. The loans are usually unsecured, but typically granted on the basis of the applicant’s character and the combined cash flow of the business and household.

Microfinance loans may require joint and several guarantees of one or more persons. The repayment may be on a daily, weekly, or monthly basis in accordance with amortisation schedule in the loan contract.

Although the CBN’s guidelines provide that the tenure of microfinance loans should be 180 days (6 months), and in the case of crops with longer gestation period, a maximum tenure of twelve months may be permitted, but nowadays in Nigeria, rarely can a microfinance bank customer get such tenor of loan.

The Guardian’s investigation revealed that majority of the microfinance banks prefers to give out loans on monthly basis. And those, who may need the fund for more than a month are required to roll it over at the end of each month and pay the agreed interest upfront.

Available data indicate that there are currently about 800 microfinance banks all over the country and many of them are now groaning under the burden of unpaid loans granted to their clients.

http://www.microcapital.org/news-wire-nigeria-high-microfinance-interest-rates-cause-loan-defaults/

British Columbia  at forefront of small-business growth

Strong immigration is one reason B.C. should remain a top province for small and medium size businesses (SMEs), according to a report Monday from CIBC World Markets.“British Columbia, the province with the largest economic contribution from small business, will remain an attractive spot for SMEs due to economic growth that is likely to match the national average, high small business survival rates, and a projected strong inflow of new immigrants,” the report concluded.However, it also noted: “British Columbia is also highly sensitive to a rise in the dollar, largely due to its reliance on the forestry industry.”

http://www.vancouversun.com/business/forefront+small+business+growth+report+says/2069421/story.html

 

Research by Aviva: 56% of SMEs diversify to survive

According to new research by Aviva over half of SMEs (small and medium-sized enterprises) have embarked upon a diversification strategy to enhance their chances of surviving the recession.Broadening the product/service range, weekend opening, lengthening opening hours and widening the customer base are all common steps that have been taken by SMEs to try and shore up their position.Less popular options include reducing headcount, lowering pay and offering new discounts.Only one in 50 of those surveyed confirmed they had requested support from one of the Government’s business assistance programmes.

http://www.insurancedaily.co.uk/2009/09/29/aviva-56-of-smes-diversify-to-survive/

France:  2 bln Euros promised for  small French firms

French President Nicolas Sarkozy announced measures worth 2 billion euros ($2.9 billion) to help strengthen the capital base of small and medium-sized firms hit by the financial crisis. Smaller French firms were especially hard hit when banks were caught by the near-meltdown of the financial sector and abruptly stopped lending. But they have long had capitalisation problems.

http://www.forbes.com/feeds/afx/2009/10/05/afx6965621.html

Uganda: Fina Bank Finds Niche Market in SME's

Fina Bank, currently linked to the Bankom network, launched its operations in Uganda in October 2008 to join the other 23 banks that are operational in Uganda. SME definition is wide and covers all types of business such as sole proprietors, partnership or limited liability companies. It could be manufacturing or trading.

http://allafrica.com/stories/200910060124.html

 

Africa: Standard Chartered Bank launches SME month

The Standard Chartered Bank has announced the launch of its 2009 Africa SME Month. The programme will run throughout October, and will provide a platform to significantly deepen the bank's understanding of its Small and Medium Enterprises customers' requirements and to drive their continued development.The bank believes the SMEs sector in Africa currently accounts for between 30 to 60 per cent of the Gross Domestic Product, saying it will be a key driver of sustainable economic growth in the continent within the next decade.

 

UK : SMEs lack awareness about financial support from Government.

In a study conducted by the Asset Based Finance Association (ABFA) found that 56 per cent of SMEs surveyed were aware of the amount of financial support available from the Government. The SMEs were asked by the ABFA if they were aware of the Enterprise Finance Guarantee Scheme, Working Capital Scheme or the Capital Enterprise Fund, which have all been developed by the Government to provide much needed financial support to the country's small businesses. A massive 56 per cent came back and said that they hadn't heard of any of the schemes

http://www.abfa.org.uk/

 

India: SMERA to rate more SMEs

The SME Rating Agency of India (SMERA) plans to rate about 3,000 small and medium enterprises before the end of March 2010. The total number of SMEs rated by different agencies in the country so far was about 15,000. Given the large number of SMEs in the country, the number rated was miniscule. The SMERA had Memorandum of Understanding with 26 banks and 14 of them offered preferential treatment to well-rated units. Several private equity and venture capital funds were interested in increasing their exposure to SMEs.

http://www.thehindu.com/2009/09/07/stories/2009090755000600.htm

National Rural Livelihood Mission(NLRM) A fresh lease of life for the rural people living below the poverty line (BPL)

The Ministry of Rural Development, Government of India, would re-design and re-structure the present Swarnjayanti Gram Swarojgar Yojana (SGSY) into a National Livelihood Mission (NRLM). NRLM would form as a cornerstone of national poverty reduction strategy(NPRS). The objective of the Mission is to reduce poverty among rural BPL by promoting diversified and gainful self-employment and wage employment opportunities which would lead to an appreciable increase in income on sustainable basis. The Rural Livelihoods Mission is proposed to have a three-tier interdependent structure. At the apex of the structure will be the National Rural Livelihoods Mission, under the Ministry of Rural Development, Govt. Of India. At the State level, there will be an umbrella organization under the State Department of Rural Development/ Department which is responsible for implementing self-employment/rural livelihoods promotion programs. The State level Mission with dedicated professionals and domain experts under the State department of Rural Department will be guided financially, technically and supported by the NRLM on need basis. The National and the State Mission will have a symbiotic relationship

Source: PIB Press Release,

 

Outsourcing Resolutions for Start-up Businesses

Small businesses or more commonly referred to as Small and Medium Enterprises (SMEs) form a huge part of the economy’s backbone. By no means do giant corporations dominate the US economy. Depending on the classification, these SMEs employ 20 people or less, 21 to 99 in some cases and 100 to 499 in other bigger companies. These start-up businesses, we can say, may not have the big capital of big gunned corporations but combined they form as much as 99% of all firms in some economies. They are definitely a force to reckon with. Because capital may be limited in some, it only makes sense for these SMEs to utilize their resources properly, minimizing costs of production as much as possible. In this information technology era, it pays to take full advantage of the use of the internet. SMEs need marketing materials as well to grow or expand the business.

http://www.dailybacktrack.com/marketing/outsourcing-resolutions-for-start-up-businesses/

 

Saudi Arabia's small businesses among the most optimistic in key emerging markets

Saudi Arabia's small business sector is among the most optimistic of 12 key emerging markets studied in a new HSBC survey, 'Emerging Markets Small Business Confidence Monitor. Small business sentiment across the Kingdom is largely positive in their 12 month outlook toward three key areas:
Investment - in their businesses; Foreign trade - especially with China and Asia.
Recruitment. The survey shows that 39% of Saudi businesses with a turnover of less than $30m (SR112.5m) expect to increase capital expenditure while only 19% believe investment in their companies will slow down. Overall, the leaders of Saudi Arabia's smaller business sector - the vital fuel of every country's economy - are more positive about the short term outlook than their counterparts in almost all other emerging markets surveyed,"

http://www.ameinfo.com/208690.html

SME HRD & Training

SriLanka: Training for SMEs in Food and Beverages sector vital

SMEs in Sri Lanka have been unable to adopt economically and environmentally sound sustainable technologies due to lack of access to expertise and technical assistance. Therefore, training is vital for this sector, said Ceylon Chamber of Commerce Chairman Dr Anura Ekanayake. more than 50 percent of the enterprises in Sri Lanka fall under the SMEs and they make a significant contribution to the industrial output of Sri Lanka, but the majority of them use obsolete technologies that consume a large amount of energy creating a serious impact on the cost of production as well as the environment and society. National Chamber of Commerce Deputy President Asoka Hettigoda said that small and medium entrepreneurs should be educated as to how costs can be reduced in their industries.

http://www.dailynews.lk/2009/09/07/bus03.asp

Israel-Kenya Coooperation:

Israeli model farms to boost food supply

Israel plans to donate model farms that use very less water and inputs like fertiliser to achieve greater yields. The model farms, measuring an eighth or 12.5 per cent of an acre are used to grow food for sale, and can generate up to KES 200,000( US$ 2000) each six- month season.( 1 USD = 75.757 KES)The model farms, some of which have been distributed are part of the country’s agriculture technology transfer from Israel to Kenya. These farms can be used by small holder farmers. The model farms are expected to play a dual role of helping to ease rural-urban migration, a challenge currently facing Kenya. One of the causes for the migration is that the youth do not want to engage in agribusiness, because they find it not financially rewarding. The model farms, with the ability to generate income comparable to that of cash crops like tea are seen as part of the solution to taming the exodus of the youth to urban areas with their high income turnover expected to attract the youth into agribusiness.

http://www.businessdailyafrica.com/Company%20Industry/-/539550/666504/-/u6i7akz/-/index.html

UN - World Economic Crisis Could Have ‘Unparalleled Negative Consequences’ on Human Development

Sha Zukang, Under-Secretary-General for Economic and Social Affairs, this morning warned of “unparalleled negative consequences” to human development, with up to 100 million more people expected to fall below the poverty line, due to the poor health of the world economy.Addressing the opening session of the Third Committee (Humanitarian, Social and Cultural), he said nations must devote special attention to those least able to handle periods of extended unemployment and rising prices. To support those vulnerable groups, nations needed strong protection systems that could preserve the well-being of families, and to prevent generations of families from becoming mired in poverty.

http://www.isria.com/pages/6_October_2009_25.php

 

Rwanda: IFC to Study SMEs Involvement in Leasing

The International Finance Corporation (IFC) will carry-out a survey on how Rwanda's Small and Medium Enterprises (SMEs) have embraced leasing as an alternative source of capital in order to offer perfect solutions and programmes for supporting their growth.The development comes a few months after the investment arm of the World Bank group alongside the Association of Micro Finance Institutions (AMIR) through Microfinance Institutions (MFIs) introduced micro-leasing for the SMEs segment. IFC, which invests directly in companies and guarantees loans to private investors, earlier this year, recommended that financial institutions should embrace micro leasing for SMEs. The IFC's Team Leader and Legal Specialist, Brian Kirungi said that micro leasing would address SMEs' current barriers to access to finance.

http://allafrica.com/stories/200909080301.html

 

IFC- Kazakhstan

IFC Investment to Expand Access to Finance for Small and Medium Enterprises in Kazakhstan

IFC, a member of the World Bank Group, announced its   investment plan  in JSC Bank CenterCredit for providing long-term capital that would help to promote access to finance for small and medium enterprises in Kazakhstan.
IFC plans to  invest in a 12.5 percent equity stake alongside local shareholders and the strategic investor Kookmin Bank of South Korea, and provide an $85 million subordinated loan. IFC has previously extended two senior loans and a trade finance line to BCC, a medium-sized bank that focuses on small and medium enterprises.
BCC is the fifth largest bank in Kazakhstan in terms of total assets, holding eight percent of the banking system’s total assets and 14.4 percent of retail deposits. Kookmin Bank is the largest bank in Korea with assets of $208.2 billion as of the end of 2008. It employs more than 25,700 staff and has five overseas branches, four subsidiaries, and three representative offices around the world. The bank provides standard banking, insurance, credit card, and investment products services.

http://media-newswire.com/release_1100422.html#

Nigeria: Economic Recession And Financial Regulation

There is hardly any aspect of the economy that has not been adversely affected be it financial, real estate, manufacturing or the service sector. Indeed like a fast spreading virus, the financial meltdown which originated from America has permeated every economy to the extent of their interconnectedness to the international financial system. It is the legitimate expectation of every rational man that in the challenging period of economic recession, financial institutions particularly the banks should come to the rescue to prop up effective demand. But the problem becomes hydra-headed where financial institutions on which the hope of economic salvation lies, run into problems as we are witnessing in Nigeria today.

http://allafrica.com/stories/200909070594.html

 

Micro Enterprises Bring Macro Results

As MSES expands and integrates into the formal economies of their countries, it empowers and transforms the lives of the world's poor, both women and men, creates more jobs and higher incomes, contributes to economic growth and strengthens democratic societies. In announcing the award, the Norwegian Nobel Committee said, "Every single individual on earth has both the potential and the right to a decent life. Across cultures and civilizations, Yunus and Grameen Bank have shown that even the poorest of the poor can work to bring about their own development."

http://nepal.usembassy.gov/sp_12-11-2006.html

 

Green shoots emerge in IT recruitment market

Signs point to increased activity in fourth quarter and 2010

Steve Martin, professional and technical director at Kelly Services, says signs of a recovery in employment in the short term are limited, but that “we’re beginning to see some emerging developments that may point to increased activity in the final quarter of this year, with stronger growth in 2010”.
The developments are particularly evident in the telecommunications sector, Martin says, where “a growing number of projects have resulted in an increase in recruitment needs for a variety of roles, from helpdesk support to business analysts”.
Hiring practices have also changed as a result of the recession, he says.
“Organisations are appreciating the importance of carefully evaluating any new employee, to ensure they are making the right decision for their increased expenditure.
“Contract staff also appear to be increasingly attractive to companies, especially SMEs, due to the reduced risk and greater flexibility of hiring a contract employee.”
Kelly Services has noticed “a distinct geographical difference in the effects of the recession on the IT industry”, Martin says.
For example, while dropping about 20 percent from pre-recession levels, “recruitment in Christchurch has remained static in 2009 and overall, IT businesses in the region appear to have weathered the storm better than in other centres.”

http://computerworld.co.nz/news.nsf/care/B364A21A9217F30ECC25762A006FC4B7

Innovation is the name of the game

Ludhiana’s half-century-old textile and hosiery cluster, which houses about 3,500 small- and medium-sized enterprises and employs over half a million skilled and semi-skilled workers, is losing an estimated 30 per cent of its annual export earnings of Rs 1,200 crore due to the slump in international orders.Many SMEs have been devoting their energies to making themselves more cost effective in order to survive. “The slowdown motivated us to introspect on how we can make ourselves more competitive, since only the fittest survive,” says an entrepreneur. These entrepreneurs have discovered an opportunity amidst the crisis.Many manufacturing units have hired consultants to implement state-of-the-art technologies to conserve power and save on power costs. Since power constitutes about 15 per cent of the running cost for a textile unit, the judicious use of power would fetch a recurring benefit for the units, stakeholders say. Ludhiana evolved as a textile hub over the years after the partition of India. Small knitting units were set up in the town by families with a business legacy who migrated from Lahore and Gujranwala after Independence. Business was done only for survival, without aiming for professional excellence.

http://www.business-standard.com/india/news/innovation-isnamethe-game/371691/

The Current State Of Microfinance In Malaysia And Challenges Facing The Sector: Observations From The Assistant Governor Of Bank Negara Malaysia

There are over 435,000 micro enterprises in Malaysia [according to the Census of Establishments and Enterprises 2005 issued by the Malaysian Department of Statistics]. This represents a potentially vast market segment and opportunity for further expansion in supply of innovative products and services by the providers of microfinance. While we expect growth in both demand and supply of microfinance to continue in the long term, we anticipate growth to moderate in the near term due to the current challenging economic environment.

Nevertheless, a new measure was recently introduced to ensure that microenterprises continue to receive adequate access to financing. The Government has introduced the Small Entrepreneur Guarantee Scheme (SEGS) [6] to incentivise lenders to disburse microloans to viable microenteprises by providing guarantee covers of up to 100% to micro enterprises. Risk-sharing schemes like these enhance the credit standing of micro enterprises, hence improving the likelihood for viable micro enterprises with little track record or no collateral to obtain financing to support the working capital needs of the business.

http://www.microcapital.org/microcapitalorg-story-exclusive-interview-on-the-current-state-of-microfinance-in-malaysia-and-challenges-facing-the-sector-observations-from-the-assistant-governor-of-bank-negara-malaysia/

 

Eradicating Poverty Through Enterprise: An Israeli Viewpoint, by Ms. Shula Ferdman

Promoting small scale enterprises is one means of eradicating poverty and is a joint effort of local, national and international organizations. It has to be part of a comprehensive plan for raising the standard of living of the population. In a world where poverty alleviation still remains one of the greatest global challenges, the linkage between training and increasing income generating opportunities is generally acknowledged.

http://www.un.org/esa/coordination/Statement.Ferdman.pdf