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“Asia and Pacific SME Knowledge and Finance Regional Center” (Regional Centre)
Alberto Reyno
Website:
http://www.adfiap.org

Employment
Economic development
Financial services and markets
Income generation
Information & communication technology
Poverty alleviation
Trade

Project Summary
Elevator Pitch

Concise Summary: Help us pitch this solution! Provide an explanation within 3-4 short sentences.

The project aims to set up an apex organisation to address the problem of SME lack of access to formal finance in Asia Pacific by promoting
better dialogue amongst stakeholders, advocating better practices, facilitating knowledge sharing and providing a platform for incubating new
approaches to enhance SME capacity and bankability.

About Project

Solution: What is the proposed solution? Please be specific!

• SME Regional Centre concept that will coordinate efforts and resources of about 150 existing SME Centres in the region, as well as
documents and disseminates their best practices to inspire others in the region. • The SME Regional Centre will take a pro-active role in
promoting knowledge incubation and development of green initiatives allowing growth while respecting the environment so SMEs can assume a
dynamic and sustainable role in the global value chain. This initiative is innovative and unique as it will deal with cross cutting issues
contributing to development and welfare while raising awareness on environmental issues. • The project will build linkages, partnerships and
better dialogues between TSIs and FIs for a better understanding of SME potentials, needs and risks to pave the way for the development of
various innovative financing schemes, bankable loan proposals, lower default rates and an easier access to finance by SMEs. As such this
initiative will be unique in its kind for Asia and perhaps beyond in its particular focus to identify specific financial solutions for SMEs for such an
economically diverse area. • The coaching modality to be provided by certified counsellors to SME managers before, during and after the loan
is granted by a Bank is not provided by any organization catering to SMEs. • The provision for an early warning system for each activity at the
national level ensures good loan performance, reducing default risk.

Impact: How does it Work

Example: Walk us through a specific example(s) of how this solution makes a difference; include its primary activities.

The project will adopt a competency building strategy for knowledge and finance along the value chain approach where focus will not only be on the
development of enterprise capacity to improve the different components of its financial management with the end in view of producing better
(bankable) proposals, but also on building better financial synergies among the actors in the value chain and the stakeholders from Government,
Financial Institutions and TSIs. The SME Regional Centre connects entrepreneurs to people, information and business resources to enhance
competitiveness; builds business alliances and SME clusters in order to strengthen SMEs in high potential sectors by reinforcing existing clusters,
encouraging setting up of more clusters in sub-sectors with high potentials and promoting linkages between manufacturing and marketing. Social
networking will also be promoted in various forms, i.e. enterprise gains access to high-value markets and export opportunities; it is able to acquire
appropriate technology for product improvement and enjoys access to affordable infrastructure in information and connectivity. The SME Regional
Centre will serve the Sector with the mindset that SMEs are empowering institutions and that the Centre and the SMEs are indispensable partners
in the difficult task of accelerating economic growth and development, generating employment and reducing poverty through financial inclusion.

About You
Organization:
Association of Development Financing Institutions in Asia and the Pacific (ADFIAP)
Visit website
About You
First Name

Alberto

Last Name

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 Reyno

Website

http://www.adfiap.org

Your Organization

Association of Development Financing Institutions in Asia and the Pacific (ADFIAP)

Country

, XX

About Your Organization

Organization Name

Association of Development Financing Institutions in Asia and the Pacific (ADFIAP)

Organization Phone

(63) 2 8161672 & (63) 2 8449090

Organization Address

2/F Skyland Plaza, Sen. Gil J. Puyat Avenue, Makati City 1200

Organization Country
Organization Type

Non-profit/NGO/Citizen-sector Organization

The information you provide here will be used to fill in any parts of your profile that have been left blank, such as interests, organization
information, and website. No contact information will be made public. Please uncheck here if you do not want this to happen..

Your solution
Country your work focuses on
If multiple countries, please list them here. If your solution targets an entire region, please select it below

Vietnam, Cambodia, Laos, Tonga, Samoa, Vanuatu, Nepal and Bhutan

Region(s) your solution focuses on:

Range of turnover in your target firms, in USD

Less than $1 Million.

Average turnover in USD of your target firm

US$250-350K

Number of employees in your target firms

More than 150.

Average number of employees of your target firm

50

Specify the size, average and range of expected loans or investments in each target firm

US$100 K, start up funds, medium term or transaction based short term.

What stage is your solution in?

Idea phase

Innovation
How does your proposed innovation leverage public intervention in catalyzing private SME finance?

The Regional Centre fully recognizes that sustainable SME finance is best achieved with a dynamic public-private partnership. It is therefore but
fitting that human and physical resources from both private entities and governmental institutions are tapped and utilized by the Centre so as to
maximize benefits for SMEs in the identified pilot countries. Government participation in the project in the Centre is deemed critical in the context
of establishing SME-friendly policies and regulations.

Since the overall objective of the project is to accelerate economic growth and development, generate employment and reduce poverty, the project
believes that the same could be effectively achieved by addressing the problem of lack of access to formal finance of Small and Medium
Enterprises (SMEs). This problem constitutes a major impediment to SMEs growth and competitiveness and inter-regional trade which
necessitates public-private participation.

Implementation of the project at the national level (in each of the pilot countries) will be entrusted to a public/private consortia consisting of a
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government development bank, a private commercial Bank, leading government agency and TSI for the targeted sectors. In consultation with the
Government and the stakeholders, a leading ministry will be identified as counterpart Organisation. This public-private framework thus assures
sustainable SME finance.

What barriers does your proposed solution address?

Asymmetry of information, Informality, Lack of collateral, Lack of financial capacity, Lack of SME access to skills / knowledge / markets,
Unavailability of financial products tailored to SME needs, Lack of institutional capacity of financial intermediaries, High transaction costs for
financial intermediaries to serve SMEs, Lack of competition / incentives for financial intermediaries to serve SMEs, General barriers to SME
development related to investment climate, Lack of financing to women entrepreneurs, Specific barriers to fragile and weak states.

If you checked any of these barriers, describe how your solution addresses them

• The Centre will be the virtual center orchestrating, and coordinating efforts of stakeholders to accelerate SME development.

• Interventions will be holistic using the hand-holding approach from social preparation, capacity building, incubation, and commercialization to
export market to enhance SMEs’ capacity to tap responsive financing option.

• The availment of services from the Centre will be stimulated through an interactive and accessible information system that facilitates information
dissemination.

• The Centre will provide access to comprehensive intervention packages provided by a coordinated framework of services responsive to the
needs of priority sectors and advocate a conducive business environment.

• A market-based approach which will be private sector-led and operate as a viable business concern. The active involvement of ADFIAP and ITD
in the project, will provide strength, professional training, capability building and enhanced partnerships particularly with the Financial Sector for
better access to need-based and innovative finance

• Provide policy and advocacy services covering sector-related government policy issues and typical private sector issues e.g tax incentives,
reasonable registration, licensing fees, etc., and development of basic infrastructures.
• Coordinated interaction among stakeholders of the supply chain to mobilize creation of backward and forward linkages

• Document best practices at the Regional level and promote knowledge sharing and benchmarking among stakeholders.

• Build capacities of SMEs to access finance through training, coaching and information services

• Enhance FIs’ understanding of SME risks and strengthen their ability to evaluate SME project proposals

Impact
Provide empirical evidence of your proposed solution's success/impact at present. If your project is in the idea phase, please provide
evidence that speaks to its potential impact

The Project is yet to be implemented pending funding thereof from donor agencies. However, it is based on a concept that has been proven
effective in other undertakings insofar as it seeks to achieve synergy among the SME stakeholders by providing a platform for coordinating in a
holistic environment all efforts, initiatives and best practices from various stakeholders for promoting SME access to formal finance as a key to
sector growth and development.

How many firms do you expect to reach?

Once operational, the Regional Centre will be able to capacitate a minimum of 400 beneficiaries. Thereafter, the beneficiaries will be able to help at
least 400 SMEs annually to gain access to formal finance.

What is the volume of private SME finance you aim to catalyze?

During the pilot phase of this project, it is expected that US$3-7 Million of private SME finance will be catalysed having a huge effect on creating
jobs and reducing poverty.

What time frame will be required to reach these targets?

The Pilot Project will be implemented over a period of three years. Five major milestones have been defined:

Year 1 - defining the governance and strategy of the centre, its operational modalities, designing and implementing the centre strategy for roll out in
selected countries launching the web site and make available distance learning to participating institutions

Year 2 - take stock from impact of implemented programmes, assess and disseminate lessons learned, solicitation of additional financial partners

Year 3 - conduct survey and assessment of new set of countries for roll-out of activities of the Centre.
Approximately 100 words left (2400 characters).

Does your solution seek to have an impact on public policy?

Yes

What would prevent your solution from being a success?

• Lukewarm commitment of support from key stakeholders and partners

• Inability to offer unique and innovative products and services that are responsive to the SME environment
• Inability to generate sufficient revenues to meet operating expenses, and to allow expansion of services to intended region-wide clientele
• Lack of synergy and productive dialogue between FIs and TSIs that can facilitate information exchange about SMEs leading to sound credit
decisions and better portfolio quality
• Website fails to attract meaningful patronage
• Inability to develop demand-driven and responsive capacity enhancement tools, activities and strategies
• High risk perception of banks towards SMEs notwithstanding risk assessment and risk mitigation interventions
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 • Non-active practice of good governance

Sustainability
List all the funding sources that are required for the sustainability of this solution

The estimated overall cost of the project is US$ 3,314,064 Million which shall be sourced from multi-lateral funding agencies from European
Commission, Japan, Australia, UNDP, regional banks (ADB) and Nordic countries.

Demonstrate how your proposed solution has the capacity to graduate from dependence on public finance. What is the time frame?

There is a need for the SME Regional Centre to adopt strategies that will ensure its long term operational sustainability and viability which rest
largely in its capacity to generate enough revenues to be viable and to flourish. Financial independence is therefore, critical for the Centre in its
objective to become sustainable.
It will be run on a revolving basis earning revenues that will ensure its sustainability. Full subsidy has no place in the Regional SME Centre for it
may only encourage inefficiency. Initially the Regional SME Centre’s operations will be funded by way of grants from international donor agencies.
Thereafter, funding will be raised by charging fees from participating TSIs.
As additional source of revenue, the Centre will also explore ways of making the web portal income generating (e.g. corporate advertisements.)
At the end of the 3-year pilot project it is expected that the activities at the regional and national levels will be carried independently and largely self
financed. This will be achieved by ensuring that the regional centre has been empowered and is receiving the endorsement of the ADFIAP
members (Banks, Governments and institutions). It is expected that following the pilot, the Centre will be able to cover its expenses on a cost
recovery basis and through membership subscription. The same approach will apply at the national level by which series rendered by the TSIs and
counsellors will be provided for a fee determined by the market. Each national project will therefore be requested to develop a revolving funding
mechanism allowing a long term strategy for self financing and sustainability.

Demonstrate how your proposed solution will survive a potential loss of its largest private funding source

A financially viable Regional SME Centre is all about generating sufficient revenues to meet operating expenses, allowing it to expand its services
to its intended region-wide clientele while maintaining existing service quality levels. Therefore, it will be run on a revolving basis earning revenues
that will ensure its sustainability. Full subsidy has no place in the Regional SME Centre for it may only encourage inefficiency. Initially the Regional
SME Centre’s operations will be funded by way of grants from international donor agencies. Thereafter, funding will be raised by charging fees from
participating TSIs. In addition, ADFIAP members will be invited to contribute to the continued sustainability of the Regional SME Centre.

Please tell us what kind of partnerships, if any, could be critical to the greater success and sustainability of your innovation

• Project partners ADFIAP, Asia-Pacific Institute of Development Finance, ITD in Bangkok and ITC in Geneva, and Consortia of private/public
project implementers at the National Level who will be consolidating their outreach in Asia and the Pacific Region to bridge the gap between SMEs
and Financial Institutions in the region leading to access to formal finance
• ADFIAP member-institutions and leading TSIs in the pilot countries to facilitate project implementation
• TSIs/SME Support Institutions and SMEs for capacity enhancements and sharing of best practices
• Banks/FIs and SMEs for access to formal finance.
• Cooperation with regional developments banks and SME institutions e.g. Exim Bank of India, Exim Bank of Thailand, PhilExim, and the SME
Bank of Malaysia, SIDBI (India), SME Centers (Thailand and Philippines, Malaysia) which should be widened to include UNDP, ADB, World Bank
and the IFC to make for Project effectiveness and viability.

Are there non-financial issues that could threaten the sustainability of your proposed solution?

• Failure in selecting committed and competent partner TSIs who will ensure the broadest and most effective outreach to SMEs along the entire
value chain
• Failure in the selection of counsellors who are willing to be part of the project on a long-term basis and who have the commitment to the
development of SMEs in their country
• Failure of TSIs to mobilize interest from SMEs
• Continued refusal of banks to open up their lending windows to SMEs despite the provision of risk assessment and risk mitigation tools
• Government changes priority and SME issues fail to attract attention required

Please tell us if your proposed solution aims to scale up through a high growth sector, expand immediately to multiple sectors, and/or
scale up geographically

The pilot phase of the Project will focus on 8 countries in the Asia and the Pacific. The choice of these 8 countries was determined in close
consultation with ADFIAP members (44 countries and 110 Banks). The targeted sectors in the pilot phase are those sectors impacting on the
economy and specifically those sectors having an export potential. More specifically the project will put the emphasis on 4 dimensions i.e. Women
entrepreneurs, the potential of creating jobs, good governance and green technology. The key SME sectors to be focused in the pilot phase are as
follow :

Asia and the Pacific Countries Key SME sectors

Pacific region Samoa, Tonga, Vanuatu Agriculture, Food processing, Construction materials, Automotive parts trading, Garments Tourism;
Fisheries; Manufacturing; Forestry; Wholesale and Retail
South East Asia Cambodia, Lao PDR, Vietnam Garment; Tourism; Construction; Agriculture; Food processing; Beverage; Tobacco; Textile and
garment; Wood processing; Agro-processing; Forestry; Fisheries; Construction; Mining & quarrying, Services.
South Asia region Bhutan, Nepal Tourism, Energy , and Mineral extracts; Agriculture

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