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SMES @ BANK ALFALAH LIMITED

Rethinking SMEs – To Do Things Differently


A Story – From Vision to Delivery
Strategic Intent and Ideology
Bank Alfalah recognizes the key role SME’s play in Pakistan’s Economy and has
developed a Long Term Strategy to target the SME segment as a major business
opportunity.

In its continuous commitment to provide sustainable solutions, Bank Alfalah has


initiated various Financial and Non-Financial Programs to improve Financial
Inclusion for SMEs.

Why at Bank Alfalah SMEs hold such great value?


Contribution of SMEs

Economic Growth Creating a value


proposition that
Incubator for development of Local Corporate entities creates a win-win
situation for both
Huge Market potential and opportunity SMEs and Bank
Alfalah Limited
Business Segmentation and Potential

Corporate / Commercial Corporate/


Enterprises Commercial
Enterprises

Medium
Enterprises
Medium Enterprises

Small Enterprises
Small
Enterprises

Agri
Agri

Micro
Micro

The Volume Pyramid Vs The Value Pyramid


.
Contribution to the Economy

Contributes Only 6% are banked


30% towards
GDP

Employs 75%
Contributes Over 3
- 80% of
25% of Million
non-
export SMEs in
agricultural
But ..
earnings Pakistan
workforce

Employs
almost 45%
of total
workforce
Only 8 – 9% of the
total private sector
lending is deployed
in SME Sector
Why SMEs are Discouraged?
Demand Constraints Supply Constraints

Borrowers hesitant to borrow from banks, preferring High NPLs in the sector (31.8% of the borrowers)
equity financing from other sources (acquaintances, has resulted in a flight to quality for Banks which has
private investors) instead of debt financing saturated the large corporate segment

Smaller size of operations and irregular cashflows Banks following a 100% secured lending model to
result in a reluctance to risk collateral with Banks minimize risk. Many businesses are unable to offer
the required collateral

Limited management capability and multiple book High search costs for Banks in terms of information
keeping results in an inability to borrow through acquisition and lack of credible data on market
Banks potential and opportunities

Infrastructural constraints like power, labor, A high percentage of Banks do not offer a
technology and law & order situation inhibit access differentiated customer value proposition with
to finance tailored SME Transactional, asset and liability
products
Bank Alfalah is focused at providing financial solutions to
assist SMEs during the incubation period; focusing on
complete financial and non-financial needs of the company
Incubator Successful and Established
Commercial Entity
Since inception of any SME it OR
5-7 Years
faces daunting challenges
Failed Business
Propositions
*Source: IFC Analytics, SBP
SME Banking Transformation
Year 2012 Year 2014 onwards

From SME Lending to Transactional


Conventional SME Banking Accounts; current
Lending Solutions and saving

Value Chain
Almost Almost Financing
11,000 280,000 of
customers BAFL
with customers,
Lending and the Business Advisory
Relationship potential Manager
market

Trade solutions with Payroll and Cash Conventional and


focus on existing Management product based
advances customers Solutions Lending Solutions
Business Cycle and Misperceptions …

Wealth Management,
Digital Banking &
Investment and Financial
Transactional Needs
Advisory Needs

Transactional
Liabilities
Flow

Cross Sell Advances

Not always a
starting point for
New
Payroll and Cash Relationships
Financial Needs
Management Needs

SME Banking
Transformation
SME Active Work Streams

1 2 3 4 5 6
SME Non Human Business
Relationship Credit
Product Financial Capital Analytics
Based Approval
Suite to be Advisory and
Model Process
Enhanced Services Monitoring

Integrating the
Value Chain Branch Led Delegated SME Business
Verticals SME Tool Kit Credit Certification
Sales Model Dashboard
Approval
Structure

BAM
Sector Based RM Business Certification SME Business
products and Productivity Advisory Streamlined Monitoring
Services Model Managers Policy and Pack
Process
Manuals Staff
Engagement
Cash-flow and
based unique 360 Degree Seminars and Automation of
Agenda Workshop Collection and Performance reporting
Product Recovery Matrix
Propositions
Alfalah Turning the Wheel for SMEs…

Ideology Initiatives Key Constraints addresses

• From SME Lending to SME


• Reduce cost of Search
Banking
• Increase Target Market
• 360 Degree Approach for
• Unique Customer Value Proposition by
Business Model SME Banking
catering to complete Need Matrix of SMEs
• Branch led SME Sales
• Relationship and Need Based Solution
Model
oriented approach
• RM Productivity Model
• Integrating the value chain
verticals
• Address Collateral Constraints
• Sector based products
• Reduce Financing Risk Through Value Chain
Product Ideology addressing the needs of
Financing
niches
• Reduce NPL through Niche Identification
• Cash flow based SME
Financing products

• SME Toolkit, an online


portal, to provide business • Enhance Management Capability
tools to enhance business • Improve Documentation and Book Keeping
Non-Financial efficiency. Methodologies
Advisory Services • Business orientation and • Improving efficiency and output
knowledge sharing sessions • Managing Infrastructural Constraints
• Business Advisory
Managers
Integrating The Value Chain Verticals

• Identify Industries with strong Value Chain Verticals


Current • Identifying Key Anchors
Account Industry • Understand the relationship and Transactional Flow of these Anchors
Prospecting and with their Value Chain Agents
Need Analysis

Transactional
Account

• Deepen anchor relationship


Cross Sell • Understand the Wallet Size and Transactional Needs of Anchors and
Products to provide appropriate products and services to fulfill these needs
Digital Payment
Solution Anchors

Complete
Lending financial and non-financial
• Evaluatesolutions forProducts
the Needs of all theand
agents in for
Services theSpecific
valueValue
chain
Chain
Solution Agents
through leveraging the anchor relationship.
Value Chain • Increase Financial Coverage for NON BAFL Value Chain Agents and
Conversions increase Product Per Customer
Product Ideology

Unsecured Financing

Value Chain Financial Segment


Financing Inclusions Niche

Long Term Financing

Alfalah has the largest suite of SME


Supplemented by:
products covering wide range of working
• US AID Credit Guarantee Scheme
capital, long term and cash flow based
• SBP Credit Guarantee Scheme
lending products
Non Financial Advisory Services

Global Best Practice:


According to a survey conducted to understand Financial Advisory for SMEs in Developed
Markets in 2001 it was revealed that almost:
95% of SMEs use
External Advisory Accountants – 83% Banks - 62%
services

Solicitors – 56% Customers – 47% Suppliers – 36%

Consultants – 32%

In Pakistan most SMEs are deprived of any form of formal


advisory services specially from Banks and keeping this in mind
Bank Alfalah has taken a step towards providing formal Business
Advisory Services through its SME Banking Platform.
NFAS at Bank Alfalah

Key impediment for SMEs is lack of management capability due to knowledge/skill gap

In its continuous commitment to provide sustainable solutions, Bank Alfalah has initialed its Non Financial Advisory
Program to provide businesses with key management tools and solutions

• Differentiate the Bank from competition by offering NFAS


• Reinforce Bank Alfalah’s brand awareness, by becoming the “Advisor of Choice” to
OBJECTIVES SMEs
• Outreach towards Non/Under-banked segment

• Information
STRATEGY • Knowledge Sharing Events
• Advisory (Business Advice Managers)

• Access to Finance / Financial Inclusion


• Improve business practices
EXPECTATION • Support business growth
• Increasing SMEs ability to secure/ repay loans
The SME Toolkit

Product Overview

Web and mobile platform

Offers the latest information and communication


technologies to help small businesses in emerging
markets to:

Learn and implement sustainable business


management practices

Increase their productivity, efficiency and capacity

Gain access to finance and new markets.

Help them in term of business guidance, market


review and industry analysis

www.pakistan.smetoolkit.org
The SME Toolkit

 Visits on the SME Toolkit since start- Over 200,000

 Local Content Development:


 Regular update of the Toolkit with articles on the
economy, different industries and sectors.
 Daily RSS Feed taken from Business Recorder.
 Articles on local trade flows uploaded.

 Video Tutorials:
 New category with 12 e-learning videos added on
the SME Toolkit.

 Content Translation:
 Urdu translation of 42 global content items
sourced from SMEDA and uploaded on the SME
Toolkit.

Award to Bank Alfalah on “Best Content


Development” in IFCs 5th Annual
Conference in Abu Dhabi
Market Outreach Activities

• More than 30 events in key commercial hubs of


major cities
Roadshows
• Conducted across all regions
• 4000+ operating SMEs tapped

Islamabad
• 12 Events conducted in major commerce Rawalpindi
chambers and trade bodies Sialkot
• Connected with 1,000+ business owners Gujranwala Kamoke

Industry Events • Tax awareness sessions held


Sargodha Muridke
Faisalabad Lahore
• Alliance with SMEDA to set-up Help Desk. Jhang
Sahiwal
• SMEs Trained by Alan Miltz, Global Finance Coach . Chichawatni
Phool Nagar
Pattoki
Burewala
Renal Khurd
Okara
Depalpur

• Trainings at 5 different business institutions Arifwala


Pakpattan
Educational • Audience of 500+ students
Institutions • Plans to hold sessions at LUMS, LSE, Punjab
University
Karachi

Roadshows

Trade Associations
• Collaboration with The Indus Entrepreneurs (TiE)
Entrepreneurial Bodies
and Enclude to provide financial training to
Entrepreneurial entrepreneurs on ‘Access To Finance” Educational Institutions
Bodies
• 4 seminars conducted
• 350+ aspiring entrepreneurs touched
Business Advice Manager (BAM) Program

Who are BAMs?

 Business Advice Managers (BAMs) are trained business


professionals who provide recommendations to SMEs after a
systematic analysis of the SMEs’ business to improve business
management practices and increase access to finance.

BAM Program:

 Bank Alfalah in collaboration with IFC’s brought in a trainer to train


all its employees on SME Banking needs and the provision of
advisory services.

 These Trainings are a One Day Program and is included as part of


each SME RM Level 2 training Program.

 All BAMs will work closely with their existing SME Customers to
assess the need of Business Advisory and provide necessary
guidance and will evaluate the performance.
Thank You !!