Success drivers of small business banks in developing economies: Four case studies compared with the IFC's SME banking value chain
Do banks that focus on small businesses in developing economies possess distinguishing attributes? The team studied four leading small business banks in developing economies and compared their practices with the SME banking value chain in the IFC SME Banking Knowledge Guide. The case studies confirmed most elements in the value chain; however, three additional overriding success drivers were observed: 1) management commitment to small business customers; 2) loan officers’ skills in outreach to customers and in preparation of credit memos; and 3) the creation of efficiencies in lending. At the same time, other activities in the banking value chain proved less crucial to these banks’ success: 1) bundling and cross-selling non-lending products; 2) the separation of business development and risk management functions; and 3) the use of customer and profitability data to fully refine their banking model. Further case studies and benchmarking will help the industry continue to refine its banking models.Beck, T., Demirguc-Kunt, A. and Soledad Martinez Peria, M. (2008) ‘Bank financing for SMEs around the world: Drivers, obstacles, business models, and lending practices’, Policy Research Working Paper 4785, World Bank, Washington, DC.
de la Torre, A., Soledad Martinez Peria, M. and Schmukler, S.L. (2008) ‘Bank involvement with SMEs: Beyond relationship lending’, Policy Research Working Paper 4649, World Bank, Washington, DC.
International Finance Corporation (2009) The SME Banking Knowledge Guide, IFC Advisory Services, Washington, DC.
Beck, T., Demirguc-Kunt, A. and Soledad Martinez Peria, M. (2008) ‘Bank financing for SMEs around the world: Drivers, obstacles, business models, and lending practices’, Policy Research Working Paper 4785, World Bank, Washington, DC.
de la Torre, A., Soledad Martinez Peria, M. and Schmukler, S.L. (2008) ‘Bank involvement with SMEs: Beyond relationship lending’, Policy Research Working Paper 4649, World Bank, Washington, DC.
International Finance Corporation (2009) The SME Banking Knowledge Guide, IFC Advisory Services, Washington, DC.
Beck, T., Demirguc-Kunt, A. and Soledad Martinez Peria, M. (2008) ‘Bank financing for SMEs around the world: Drivers, obstacles, business models, and lending practices’, Policy Research Working Paper 4785, World Bank, Washington, DC.
de la Torre, A., Soledad Martinez Peria, M. and Schmukler, S.L. (2008) ‘Bank involvement with SMEs: Beyond relationship lending’, Policy Research Working Paper 4649, World Bank, Washington, DC.
International Finance Corporation (2009) The SME Banking Knowledge Guide, IFC Advisory Services, Washington, DC.
Beck, T., Demirguc-Kunt, A. and Soledad Martinez Peria, M. (2008) ‘Bank financing for SMEs around the world: Drivers, obstacles, business models, and lending practices’, Policy Research Working Paper 4785, World Bank, Washington, DC.
de la Torre, A., Soledad Martinez Peria, M. and Schmukler, S.L. (2008) ‘Bank involvement with SMEs: Beyond relationship lending’, Policy Research Working Paper 4649, World Bank, Washington, DC.
International Finance Corporation (2009) The SME Banking Knowledge Guide, IFC Advisory Services, Washington, DC.
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