Alternative Funding for SMEs. Matthew Gamser CEO, SME Finance Forum May 2015

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1 Alternative Funding for SMEs Matthew Gamser CEO, SME Finance Forum May 2015

2 WHY NOT SERVE SMMES? xpensive to acquire Expensive to serve

3 Why is alternative data needed? Most SMMEs have no borrowing record from the formal financial sector Labor-intensive approaches to bridging the information gap too expensive for SME market for larger financial institutions HOWEVER: SMEs electronic footprints growing rapidly, some of which is already in the banks Other footprint (ecommerce, eg) very valuable for capacity and willingness to repay

4 OLD AND NEW APPROACHES and

5 Big data: what s different today? ore digital data, more diverse data, and more real-time data means ore data can be predictive data, provided you can find it and use it New data sources, plummeting transaction costs

6 ow much data and where? The digital universe is more than doubling every two years; emerging markets will surpass mature markets by only 1% of this data has been analyzed 6

7 Growing SMME finance from payments data Failure to commit to MSMEs and innovation makes banks vulnerable to a new breed of digital competitors all along the credit and payments value chains Online supply chain finance Invoice financing M-POS acceptance/value add Analytic firms aiming to revolutionize credit models, drive growth Mobile microlenders will graduate to SMEs

8 Alternative online lenders shaking up SMME credit They have convenience, cost, speed, and new data competitive advantages over bank lenders; they can out-fico FICO! P2B lenders Online direct lenders Best fit MSMElender matching

9 portunities to build on data-driven lending Risk Sharing Facilities Core objective is to guarantee loans offered by FIs to a borrower subject to both payment o premium and a range of rules and conditions. Can be organized as mutual guarantee institutions, credit guarantee banks, or credit guarantee fu owned and operated entirely by the public sector or by a combination of public and private. Effective vehicle for reaching underserved groups such as start-ups and small firms. Encoura banks to enter the SMME market and improve lending and risk management systems. Securitization Systemic solution to strengthening FIs capabilities to supply long-term funding to SMMEs. Securitization of individual loans does not necessarily improve access to finance for individ SMMEs, but on a portfolio level FIs are able to expand SME lending thus having a positive impac the overall availability and conditions of loans. Credit rating agencies are integral to securitization and ratings focused on SMEs further enha conditions of loans to this segment. pital and Bond Markets Domestic corporate bond markets provide a number of benefits: they help diversify econom reduce systemic risk, and mitigate exposure to currency swings. As economies evolve, local companies grow larger, and develop more complex funding needs ( handling larger investments and managing liquidity, interest-rate, and foreign currency risks). Other benefits include: More efficient distribution of resources, Greater corporate and mar transparency, and more efficient risk pricing. Financial Institutions Group (FIG)

10 Implications for Policymakers INFORMATION/PRIVACY BALANCE

11 The SME Finance Forum Initiated by the G20 countries, managed by IFC Unique global platform for knowledge exchanges and good practices promotions in SME finance Website for news, events, publications, tools LinkedIn: members and active discussions Twitter: followers Women s Finance Hub IFC Enterprise Finance Gap data (and more) Networking and peer learning: global and regional events

12 Online Knowledge Bank rtual platform to share knowledge and promote good actices in SME finance, including for women-owned Es: Promote collaboration Promote successful business models Disseminate research and data ccelerate access to finance for SMEs news, events, publications, tools 100+ new items added every month 5,000+ visits and 13,000+ page views per month

13 SME Data m as a Portal Make existing SME data public and user-friendly Fund strategic research, as necessary Create consistent data standards and formats Create interactive maps and charts for analysis and decision-making Private data options for members rently available Created interactive maps and charts for the IFC Enterprise Finance Gap database Visualize the IFC Reach database, which reports on MSMEs funded by IFC client banks worldwide ing soon Visualize the SME component of the IMF Financial Access Survey Reach data from other IFIs/DFIs

14 SME Finance Events e SME Finance Forum and Women s Finance Hub so act as conveners and have supported learning ents including: IFC regional client meetings Finovate Foromic Innovator s Series IFI-DFI Working Group meeting AFI SME Working group meeting OECD-ADB joint conference on SME Finance Global Partnership for Financial Inclusion Annual Forum USAID-IFC speaker series Financing Women Entrepreneurs for Growth

15 A Member-based Forum Conversion to be implemented by December 2015 onversion to be implemented by ecember 2015 Networking/Peer Learning Data Links to Fintech services Good Practice Cases Advocacy OTHER IFIs/DFIs Conversion to be implemented by December 2015 IFC JT2 SME FINANCE FORUM COMMERCIAL BANKS AND OTHER FIs/fintech COMMERCIAL BANKS AND OTHER FIs/fintech (20+) (200+)

16 Slide 15 JT2 re-do this graphic (not clear why commercial banks and other FIs appear in the purple triangle and below). Insert SBBN into this slide, contributing members Jeanette Thomas, 1/29/2015

17 Launch of Global Membership Network Target date: November 2015 Launch under auspices of G20 leaders representative Declare their goals for closing SME finance gap Highlight their institutions performance to date Venue Turkey Audience of policymakers, financiers, innovators, media

18 Team and Donors Matthew Gamser, CEO Our Team Donors Support for the SME F Hourn Thy, Operations & Technical Support hthy@ifc.org Nadia Afrin, Head of Communications nafrin@ifc.org Minerva Kotei, Women s Finance Hub Mkotei@ifc.org Nothando Nyathi, Executive Assistant nnyathi@ifc.org Support for the G20 Finance Innovation Fund provided by:

19 Web Linkedln SME Finance Forum 18