Channel NewsAsia

Financial industry providing more services to SMEs

The financial services industry is raising efforts to help SMEs find the necessary expertise and funding as they themselves seek to tap growth opportunities in this fast-growing segment.

SINGAPORE: The financial services industry is reaching out to small- and medium-sized enterprises (SMEs) in Singapore. It is raising efforts to help such businesses find the necessary expertise and funding as they themselves seek to tap growth opportunities in this fast-growing segment.

American Express may be better known for its credit card and payments services among consumers but it is starting to enhance its services to corporate clients in Singapore - small- and medium-sized merchants in particular. It is partnering firms that can provide the relevant expertise to these merchants at preferential rates, in areas such as online marketing and mobile loyalty programmes.

American Express said that as part of these efforts, it is also providing grants to selected SMEs in an upcoming campaign.

"We are offering grants of S$5,000 to the tune of S$50,000 in total, between Aug 1 and end of the year. This is American Express' way of starting a more aggressive approach into the SME space,” said Mr Kevin Alcott, vice president and general manager of merchant services for Singapore and Thailand at American Express International.

“We have found that there is a gap and a want for some of the expertise that we can leverage our partnerships to help deliver for them. We are seeing that they are looking for productivity measures that are going to help them improve their efficiencies. As such, we are creating tools, whether payment tools or online tools or loyalty tools; we feel we can help support their businesses in that area. "

Besides helping SMEs find the necessary expertise, banks are also doing more to service their financial needs. OCBC Bank said it serves more than 40 per cent of the SMEs in Singapore and the lender wants to make it easier for them to get funding.

"The fact that they do not have a track record of performance, they always find they have certain difficulties getting funding. This year, we launched our Business First Loan, providing credit facilities to companies as young as six months old, funding up to S$100,000," said Mr Eric Ong, senior vice president and head of emerging business at OCBC Bank’s Global Enterprise Banking.

Analysts said the interest in SMEs comes amid an environment of slower loans growth in other areas.

"There is a combination of factors, one of which is definitely the slower loan amount in the housing sector, and car segments too,” said Mr Ng Kian Teck, lead analyst at Voyage Research. “At the corporate side, for bigger companies, there is some loan growth. But for banks, they want to lend out as much money as possible so SMEs become a possible engine where they can lend out more money."

According to a recent report by the Asian Development Bank, SME loans made up 25 per cent of total bank lending in Asia Pacific in 2012. And consultancy McKinsey has forecast that revenue from SME banking in the region will grow by more than S$180 billion between 2010 and 2015. Despite the growth prospects, industry watchers observe that banks still tend to take a conservative approach.

"At the operating level, in terms of working capital, daily capital needs and short-term trip financing, banks would be happy to lend corporates for such kind of borrowings, but for anything longer such as six months to one year, banks would be rather hesitant to lend to such SMEs,” said Mr Ng. “There is a prospect for banks to lend to them, but it is a matter of what is the risk to the banks, and what kind of safeguard measures they can take in the event of a default."

Latest statistics from the International Finance Corporation show that more than half of the SMEs in Asia Pacific are estimated to be underserved, in terms of their need for financing. 

Tweet photos, videos and updates on this story to  @channelnewsasia