Johannesburg, 15 Sep 2004
Banks have no interest or concern for the SME. Even though they say their strategy is to cater for the SME, they talk a different language to the SME, and more often than not trip up the SME rather than provide assistance.
This is according to Keith Levenstein, CEO of Econoserv, a producer of accounting software for the SME market.
"We are an SME, and also cater for the SME market. We know what SMEs face on a daily basis from a financial point of view, and how alienated they are by the banks. The banks, being large corporates, make no effort to accommodate the SME, or even understand their requirements. This is our experience talking to numerous SMEs each month," he says.
"This is worrying, since everyone from the President down recognises that one of the key ways to solving SA`s unemployment is through SMEs. For every new SME started up, two or three people become employed.
"Our research has shown that most SMEs do not produce accounts or financial information, whether they own an accounting package or not. This is partly due to the difficulty of capturing their financial information and in their own lack of financial knowledge."
If they are unable to produce financial accounts they will be unable to make qualified decisions about their own business. Equally important, banks will not advance loans or overdrafts to businesses without the required financial information.
"We have become aware of retail bankers who want, or at least are allowed by their bank`s policy to give overdraft facilities to clients, if those clients can supply management accounts. In some cases the banker has waited for 18 months, by which time both the business and the bank have lost business. I would have expected banks to want to advance as much money as they possibly can, risk allowing," says Levenstein.
"A logical step would be for banks to educate their clients in bookkeeping, and help them produce their accounts. After all, it is usually a lack of finance that causes people to refrain from starting up a business. If banks were serious about `caring for` smaller customers, surely they would want to assist them in any way whatsoever. In the long-term it would make them more money, and lower their risk.
"However, this is apparently not the case. Bankers we speak to do not understand the areas of concern to the small business, or don`t bother to even try to find out what the issues are."
A bank may ask for a business plan and financial forecast - the SME is hardly able to write up invoices and issue statements. There should be some facility to help businesses do their accounts.
As a result, small businesses would get more loans than is the case. But the current situation totally defeats government`s and business objectives of empowering the SME market. In a personal case, the banker handling EconoServ`s own loan application did not even ask what our business does.
"She was only concerned about the amount of surety we could offer to cover the bank`s risk. While I understand this business logic, surely it defeats the object of operating in the SME market," says Levenstein.
There is an enormous unbanked population who do not qualify for bank facilities. Banks are spending many hours every day thinking of risk-free ways to include those people into formal banking. Don`t they realise that SMEs are the way to start this process?
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