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Expert Meeting on Improving Competitiveness of SMEs in Developing Countries: The Role of Finance, including E-Finance, to enhance enterprise development Geneva, Oct 22 - 24, 2001 E-finance for SMEs THE PATH A presentation by: Sanjay Guglani SMEs Dominant contributors to GDP

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slide1

Expert Meeting on Improving Competitiveness ofSMEs in Developing Countries: The Role of Finance, including E-Finance, to enhance enterprise developmentGeneva, Oct 22 - 24, 2001E-finance for SMEsTHE PATH

A presentation by:

Sanjay Guglani

slide2
SMEs
  • Dominant contributors to GDP
  • Key employment engines
  • Enhance National Competitiveness
  • Commercial Banks, Venture Capitalists, Governments... initiatives
  • E-payment gateways & platforms

Wow!

slide3

Do we have reliable

data on SMEs ?

the foundation
The Foundation

Authentic & exhaustive database

Collation problems:

  • Spread & Diversity
  • Income under-reporting
  • Accounting / Planning
  • Cost of administration

Solution:

  • Involve SME associations

Community Ownership!

e culture
e-Culture

Comradeship is the key

PULL strategies

Multi-tier data entry

Authentication & normalization

Universal Identification

Mandatory info. collation & updation

Online trade fairs & trusted digital mkt place

That’s how!

impact of e finance on banks net margins net interest income
Impact of e-finance on banks’ net margins(net interest income)

Economies Net margin

1997 20052010

Developed nations average 2.34 1.96 1.69

Emerging markets average 4.39 3.85 2.50

Brazil 7.76 6.63 3.63

Czech Republic 3.04 2.77 2.07

Hong Kong, China 2.90 2.26 1.73

Mexico 3.64 3.26 2.27

Russia 4.79 4.21 2.65

South Africa 4.96 4.34 2.70

Turkey 11.17 9.41 4.75

e trade
e-Trade
  • Lack of credit scores
  • Opening LSE info-systems
  • EDI back-bone
  • Digital storage certificates
  • Dynamic working capital allocation
  • Use SME associations
  • Government-sponsored Trade-Nets
  • Smart Cards

Yes!

slide9

Telco loss 100 m projected ‘06: 900 m USD

Material costs down by 40 m

Inventory down to 57 days (from 75 days)

Tata AutoComp: 12 suppliers, 40 OEMs, 330 component cos. & numerous SMEs.

slide10

Many of these SMEs with no access to any formal channel of financing

Telco info-net

JIT - SCM - Transaction history

Financial sector provide voluntary quotes rates for discounting Tata Engg bills at 20 - 25% lower rates without bothering of recipient SME, collateral or accounts

Turnaround leveraging SME relationship

Funding sans collateral /accounts!

desired govt initiatives for e finance
Desired govt. initiatives for e-finance

Policy AreaCurrentNew

paradigmparadigm

Creating an enabling environment

Telecom & security framework, PKI $ $$$

Info., privacy & contractual framework $$ $$$$

Institution specific financial laws $$$$ $$$

Market infrastructure $$$$ $$$

Consumer, investor & institutional risks

Consumer & investor protection $$$ $$$$

Prudential regulation $$$$ $$$

Markets - functioning, performance & risks

Competition policy $$ $$$$

Functioning, transparency, liquidity... $$$ $$$$

Forms of government intervention

Banking, micro lending,direct credit $$$ $$

Information prov. & collateral inst. $$$ $$$$

Use of existing infrastructure $$$ $$$$

e finance for smes
E-finance forSMEs

Short term funding:

Quasi-factoring…

Medium term funding:

Dematerialization & standardization

of debt paper (mortgage)

Risk Capital:

Online venture capital processing & monitoring

a snap shot
A Snap-Shot

Stage Target

Foundation “Live” database

e-Culture Unique identity

e-Trade Credit history / EDI

e-Finance No financial constraint

Immediate Action Plan

  • Leverage SME associations
  • Open LSE info-systems relating to SMEs to financial community.
slide15

Thank-you

  • Contact details:
    • Sanjay Guglani
    • Saksham Financial Services (P) Ltd.
    • K-101 (3rdFlr) Lajpat Nagar-2
    • New Delhi - 110024. INDIA
    • Tel # +91-11-6914959/69/79
    • Mobile # +91-98101-98869
    • Email: guglani@VCline.com
    • Website: www.VCline.com