building capacities to improve access to finance

8/3/2019 Building Capacities to Improve Access to Finance

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ITC enables small business export success in developing

countries by providing, with partners, sustainable and inclusivetrade development solutions to the private sector, trade support

institutions and policymakers.

ITCs Mission


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Business and Trade PolicyTrade Support Institution

StrengtheningExporter Competitiveness

Export Strategy Trade Intelligence

Trade Policy

Build capacity for

trade negotiations

Establish an adequate

institutional framework

Develop and implement

strategies

Enterprises

Conclude commercial

transactions

Prepare for exports

Formulate strategies

for exports

Trade Support Institutions

Advise

policymakers

Strengthen

SME capacities

following

ITC criteria

Improve

networks

Building capacities on three levels


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Trade Finance for SMEs is part of a section whose

objective is to create a conducive business environment

for exporting SMEs

The Business Environment Section provides specialized products and services

for the development of exporting SMEs along an integrated approach in three

areas

Trade Law Trade Finance forSMEs

Export Facilitation

Business Environment

Section


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SMEs constitute the majority of business enterprises, and they are

vital for employment generation and poverty alleviation.

Lack of Trade Finance is a major impediment to ITCs thrive towards

export impact for good: Financing is the number one constraint citedby SMEs in developing countries (World Bank)b

ITC's Trade Finance for SMEs Programme aims at assisting exporting

SMEs at all stages of their development, by enhancing access toaffordable credit, building entrepreneurs' financial management skills,

and encouraging the development of financial instruments and

mechanisms tailored to SME needs.

In most developing countries and transition economies

Trade Finance is a major impediment to SME

development


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Impact of the Financial Crisis

The financial crisis has exacerbated SMEs difficulties toaccess finance

It is urgent to develop and implement short term solutions

specifically designed to restore confidence and dialoguebetween SMEs and Financial Institutions.

To alleviate the impact of the crisis on SMEs, ITC has

developed a strategy bringing short and medium term

solutions


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In response to the lack of trade finance for SMEs,

ITC addresses four main challenges with a detailed

and integrated responseChallenges ITC's response

Certified Trade Advisors program

Online financial management training self-

checkers

SME financial management certification

Competency as Collateral (LOANCOM)

Progress monitoring and coaching of SMEs

Partnership with other financial organizations

Long-term guarantee and credit linesSME competency building

LoanCom

Benchmarks and best practices for all relevant

stakeholders

A. Build capacities of SMEs to access

trade finance and strengthen their

financial soundness

B. Enhance Financial Institutions'

understanding of SME risk and their

ability to evaluate needs and project

proposals

C. Coordinate with other financial

organizations to mobilize long-termcredit and guarantee lines dedicated

to exporting SMEs

D. Broaden the range of financial

services tailored to SMEs


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A. Building capacities of SMEs to access finance

Setting up a network of national counsellors

Purpose Generate a multiplier effect in country, through a network ofcounsellors providing training & advisory services in financial

management to SMEsprior, duringand afterthe loan

Implementation mechanism Identification of potential counsellors and training in financial

management Certification in financial management of counsellors satisfactorily

fulfilling the program Can be combined to ITCs Enterprise Competitiveness Program

Sustainability Certified counsellors are linked to a national Trade Support Institution SMEs to pay a fee for their services


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Training modules in financial management

Target audience SME Counsellors

Purpose Support material used to train counselors in adopting sound financial

management practices and developing bankable proposals

Implementation mechanism Generic training set comprising seven modules developed by ITC Modules tailored to the specificities of the country and sector where the

project takes place

Training delivered face to face, followed by practical work Coaching throughout the training program


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Content of generic modules

1. How to estimate

SME financial needs

Introduction to short-term and long-term

finance

Analysis of key components that determine acompanys financial needs (fixed assets,

working capital, marketing costs, financial

cushion, committed cash outflows)

Methods for estimating a

companys financial need

1. How to estimate SMEs financial

needs

2. Alternative sources of finances for

SMEs

3. Payment mechanisms & riskmitigation in international trade

4. Developing bankable proposals

5. Bookkeeping & Cash Flow

management

6. Analyzing financial statements

7. Budgeting & Forecasting


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Content of generic modules (contd)

2. Alternative

sources of finance

for SMEs

Presentation of most common sources of

finance available for SMEs

Discussion of advantages & drawbacks of

each source

Procedure to select the most appropriate

source of finance

3. Payment

mechanisms & riskmitigation in

international trade

Main payment mechanisms in international

trade, pros & cons and applicabilityHow to select the best payment mechanism

Key risk mitigation instruments in international

trade


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Role of bookkeeping and accounting for a

company Best practices in bookkeeping

Revision of bookkeeping process

Practicing through exercises




4. Developing

bankable proposals

Understanding financial institutions practices

& requirements for a loan proposal

What makes a proposal bankable

Process to develop a bankable proposalCommon formats of business plans

5. Bookkeeping


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6. Analyzing

financial statements

Role of financial statements (internal/ external)

Revision of key financial statements: balance

sheet, income statement, statement of cash

flows

Introduction to financial ratios

7. Budgeting &

Forecasting

Importance of sound planning for business

success

Link between strategic planning and budgeting

The budgeting process

The master budget and its components

Using data & information for

effective financial control


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Financial management self-checkers

8

Target users SME managers

Purpose Self-tutorials to identify and address weaknesses in financial

management (SME FinCheck) and in accessing finance (SME

FinAccess) Understand and quantify the impact of different loan and amortization

scenarios on cash flow (SME LoanCalc), in preparation to negotiations

with bank.

Implementation mechanism Three generic self-checkers developed by ITC Self-checkers tailored to the specificities of the target country and

sector Available online/ offline through partner Trade Support Institution

Possibility to switch from one pre-defined language to another


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Use of generic self-checkers

SME FinCheck SME manager answers a set of questions aimed at

testing his knowledge in business management and

financial managemento Topics tested in financial management: knowledge

of general concepts, ability to plan, execute andmonitor the use of financial resources

Once questions are submitted, the software generates a

report on the SME managers performanceo Graphical representation of performance in

business/ financial managemento Visual representation of performance in financial

management broken down per sub-topico Substantive explanations generated and displayed

for questions where the SME

manager answered incorrectly


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Use of generic self-checkers (contd)

SME FinAccess Same principle as SME FinCheck: questionnaire to be

answered by the SME manager, with automatic

generation of a detailed performance report with graphs

and substantive explanations

Topics evaluated related to steps surrounding access to

financeo Ability of SME manager to assess his real needso Ability to identify best instrument and source of

finance

o Pre-requisites to preparing a loan requesto Quality of the loan request (in particular financial

part)o Submission of the loan request and negotiation with

the bank


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Use of generic self-checkers (contd)

SME LoanCalc The SME manager fills in the details of his (expected)

loan, in particular amount, interest rate, maturity,

amortization scenario

The software returns different amortization cases and

offers the SME manager the possibility to refine his

analysis

The SME manager has the possibility to export the

amortization tables to excel and further rework data.

o Example: in excel, he can add fees in order todetermine the total cash outflow generated by the

loan during the periods considered


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B. Help FIs mitigate risk in SME lending

LoanCom

Target users Bank loan officers

Purpose Online interactive decision support system for financial institutions

involved in SME lending

Innovative approach:o analyzing non-financial parameters alongside traditional financial

parameters to determine the real potential of SMEso aims at developing a new breed of bankers

Implementation mechanism Tailored version of software developed in partnership with the partner

financial institution Software can easily be integrated to FIs information system Software becomes property of the FI


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Use of the decision support system

The loan officer fills in the financial and non-financial

questions following his analysis of the project proposal

and his interactions with the SME manager

Based on his input, the software automatically

generates a report analyzing the performance of the

SME managero Visual representation of financial and non-financial

performanceo Detailed analysis of the weaknesses of the SME/

project proposalo A final recommendation on how to proceed with the

loan request

B. Help FIs mitigate risk in SME lending

LoanCom


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B. Help FIs mitigate risk in SME lendingEarly warning & coaching system of loan recipients

Concept Partnership between Bank, Trade Support Institution and loan recipient

to enable early detection of repayment problems, coupled with targeted

coaching of the SME to address issues identified

Beneficiaries The Bank: the probability of its loan being repaid is increased The TSI: fulfills its mission of assisting SMEs The SME: gets targeted assistance, reduces default risk and increases

its creditworthiness

Conditions for sustainability Committed partners Each party fully understanding reciprocal benefits Institutionalization of process


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Concrete example:ITCs strategic Approach

to Trade Finance for

SMEs in Cambodia

BANK(S)UNDP/ AFD /

WB

TRTA

Services

& Finance

Credit &

Guarantee Lines

SMEs

Commodities

Sector

ITC

Local

Institutions

SMEFinance

SME

competence

Private Sector

Development

LOANCOM &

other tools

C. Coordinating with other organizations to

secure credit & guarantee lines for SMEs


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D. Broaden range of financial services for SMEs

Publications & Tools

Target users SME managers Counselors & Trade Support Institutions Policy-makers

Purpose Better diffuse information on SME finance Raise awareness and share best practices on innovative trade finance

schemes

Implementation mechanism Key topics identified and scope determined Publication developed in close collaboration with experts in the field


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Publications & Tools

Examples How to access finance a guide for exporting SMEs Islamic banking a guide for SMEs Finance for Trade Business Navigator on e-Finance for SME Exporters in Developing

Countries Export Credit Insurance and Guarantee Schemes: A Practical Guide

for Developing and Transition Economies Financing Service Exports Foreign Exchange Derivatives and Risk Management in Developing

Countries

How to Approach Banks: A Guide to Short term Trade Credit How to Evaluate Trade Credit Requests: A Guide for Bankers and the

Scorecard Glossary of Trade Finance Terms Trade Finance: A legal Guide for Cross-Border transactions


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Reaching out to SMEs in rural areas

Rationale To make finance accessible to SMEs even in rural areas, where

access to finance is limited or inexistant

Example of schemes under consideration Postal banking Mobile banking

Poverty Alleviation Women Empowerment


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ACCESS TO FINANCE FOR SMEs FOR INTERNATIONAL COMPETITIVENESS

Poverty Alleviation, Women Empowerment

Global Partnerships for Development

Response to Financial Crisis

TSIsFinancial

Institutions

In country multiplier for SME

capacity building before, during and

after the loan

Increased SME lending

while mitigating risks

Restoring dialogue between SMEs and Financial Institutions:

ITC

OFFERING : A one stop window

Knowledge base

for SME capacity

building in

financial

management

TSI coaching for

improved SME

support

Assistance to

financial

institutions

Partnerships


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Thank you!

For more information please contact:

International Trade Centre

54-56, rue de Montbrillant

Palais des Nations

1211 Geneva 10, Switzerland

Tel: +4122 / 730.11.11 Fax: +4122 / 730.05.76

building capacities to improve access to finance

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