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Helping SMEs meet the requirements of formal financing - Increasing SME Access to Finance: A Four Pronged Approach
Written by: OECD Development CentreArticle Overview: Apart from the need to boost SME capacities, some financial instruments can help provide missing information or reduce the risk stemming from some SMEs’ lack of transparency.
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Helping SMEs meet the requirements of formal financing - Increasing SME Access to Finance: A Four Pronged Approach
Apart from the need to boost SME capacities, some financial
instruments can help provide missing information or reduce
the risk stemming from some SMEs’ lack of transparency.
Franchising, which is very popular in Southern and East
Africa with the encouragement of South Africa, allows use
of a brand name or know-how that reduces the risk of
failure. Warehouse-receipt financing (in South Africa, Kenya
and Zambia) guarantees loans with agricultural stocks.
Other financial instruments, such as leasing and factoring,
can reduce risk effectively for credit institutions but are
still little used in Africa.
Credit associations that reduce risk by sharing it are more
common. They help financial institutions choose to whom
to lend, by guaranteeing the technical viability of projects,
and sometimes providing guarantees. But growth of these
bodies is limited by the lack of organisation among SMEs
in Africa and by their focus on certain sectors and
geographical areas.
Governments and donor sources have thus preferred creation
of guarantee funds to ensure repayment in case of default.
In several countries, especially in Central Africa, this has
not worked since provision of a guarantee has meant less
rigorous choice of investment projects and a lower rate of
debt recovery. Elsewhere, notably in Mozambique, borrowers
and financial institutions have worked together to maintain
a good rate of recovery and to reduce interest rates.
Financing SMEs in Africa
by Céline Kauffmann
Policy Insights No. 7 is derived from the African Economic Outlook 2004/2005, a joint publication
of the African Development Bank and the OECD Development Centre
Restricted Access to Finance
Improving business conditions - Increasing SME Access to Finance: A Four Pronged Approach
Expanding the supply of finance through the non-financial private sector - Increasing SME Access to Finance: A Four Pronged Approach
Facts about SMEs in Africa
Making the financial system more accessible to SMEs - Increasing SME Access to Finance: A Four Pronged Approach
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Re: Women and Financing - It's Difficult!
- I found this paragraph of interest (in the article from Nana's link:
[quote="Nana":3r7womqv]Other studies show that women operate more service and retail establishments than men, which might explain their difficulty in getting financing since financial institutions often consider these two sectors more risky. However, although women are generally less inclined than men to apply for financing, when they do, they are more likely to get it. According to a study by Industry Canada on SME financing in Canada, in 2000 majority female-owned SMEs obtained a loan approval rate of 82%, which is slightly higher than the approval rate for majority male-owned businesses (80%). This suggests that when they do apply for financing, businesswomen submit excellent applications. [/quote:3r7womqv]
They say, "Women are more likely to get [financing]."
But the difference is only 2 percentage points! Big deal! And, that was only for one year, 2000. I'd like to know what the 10-year average is.
Numbers can be manipulated to mean anything you want them to mean...it all depends on what you want to show.
Re: Is it worth buying a Dell computer with financing?
- [quote="JBunion":3lokpupn]You will always spend more money financing any product over a long term payment plan. The interest payments and total cost sometimes make it even double more than you would pay if you outright purchased it at the beginning.[/quote:3lokpupn]
True, but cash flow for many people can be tight and financing is the only option, especially if the computer is needed right away.
For instance, I don't have the money to buy my laptop in full right now... but by early March I will. However, I need a new laptop as soon as possible. So what would you advise I do? Finance the computer today, and then pay it off in full in early March? Would that be a good strategy? In that case, wouldn't I only be paying 2-3 months of interest?
Re: Finance is the primary requirement of business
- [quote="rauljoseph":36x8dadn]Finance is very important in a business. It is all about managing the business' money and other assets. Finance includes the study and analysis of processes, financial institutions, markets and instruments that are involved in the transfer of money or anything that has a monetary value among consumers, businesses and government.[/quote:36x8dadn]
Good point.
I'll just add that if I was going into business for myself and could only have one skill it would be Sales & Marketing. You need to be able to create customers first and foremost. Finance is more of a support function for entrepreneurs.
Finance is the primary requirement of business
- Finance is very important in a business. It is all about managing the business' money and other assets. Finance includes the study and analysis of processes, financial institutions, markets and instruments that are involved in the transfer of money or anything that has a monetary value among consumers, businesses and government.
Re: Where do you meet with clients?
- If you meet with a client in a less conventional place (i.e. [u:20e6i90l]NOT[/u:20e6i90l] the office or coffee shop), do you find that the conversation becomes less formal and more personal? Is there a point in time when you actually want to get to know more about your client as a person rather than only from a business standpoint?
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