SME's need cash, of that there is no doubt. Similarly, SME's are extremely high risk clients for banks, and it is unlikely that this will ever change.
So what is the solution, if one exists at all? The solution lies in providing a compliance model that mitigates the banks' risk. Until such time as we mitigate bank risk, it is unlikely that banks will free up finance to SME's on a significant level.
The existing compliance models within the market are working well and banks readily fund SME's that are part of compliance models. However, they need to be done on a larger scale in order to create more SME's. Similarly governments must perhaps fund the development of these compliance models by entrepreneurs, and avoid attempting to do so themselves, as this will surely lead to failure. The beauty of compliance models is that they reduce the need for entrepreneurs to drive these new SME's, and allows SME managers to be able to successfuly manage these businesses.
So let us make it easy for banks to fund African SME's, let us reduce the need for aid funding and charity, let us create SME's through compliance models.
Rob Smorfitt
To learn more about this author, visit Rob Smorfitt's Website.
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Rob Smorfitt
(Visit Rob's Website)
Based in Pietermaritzburg, South Africa.
Married with 3 children (22, 21 and 14).
Have an MBA and am currently doing a PhD
in entrepreneurial success. I have been
self employed since 1982. I have started
26 and bought 5 businesses since then.
Most were sold again and a few were shut
down because of a lack of profitability.
Many were run by staff or family while I
worked in full time employment in my
bigger businesses. 6 books written in SME
and Project Management educational field.
Written articles for various magazines,
newspapers and websites.
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