- Reveals best practices banks looking to capitalise on NFS opportunities can follow
A recent study by the International Finance Corporation (IFC), a member of the World Bank Group and the largest global development institution focused on the private sector in emerging markets, in conjunction with the FMO, a Dutch entrepreneurial development bank and a leading impact investor has revealed that enormous potentials remain largely untapped due to systemic barriers facing women-led enterprises globally.
The study, released by the corporation, examines the benefits of women-led SMEs to banks of integrating non-financial services (NFS) that can help mitigate these barriers into a women-focused SME banking proposition.
According to the report, “women-led small and medium enterprises (W-SMEs) represent a great opportunity to banks as women own 34 per cent of private businesses globally, including almost six million formal SMEs in the developing world. Also in emerging markets, formal SMEs create seven out of ten jobs and contribute up to 40 per cent of economic growth in terms of gross domestic product (GDP) while in OECD (organisation for co-operation and development) countries, the contribution to growth can be up to 60 per cent.”
A cursory look into the report shows that well-integrated NFS offers for WSMEs yield positive return on investment (ROI) within one to two years. However, four key metrics: increased interest income from loans; an increased share of wallet from cross-selling, deposit volume and fee income; including fees charged for NFS participation; increase in loyalty; and reduced portfolio risk can help drive return on investment for the non-services (NFS).
With the knowledge that increased interest in income is seen to be the largest contributor to return on investments, it signals an opportunity for banks to ensure their full product suite, along with communication and delivery is tailored to W-SMEs, as this can pave the way for the segment to take full advantage of the bank’s offers, the report revealed.
Meanwhile, as the cost of technology drops and the number of service providers increases, some banks have begun to include business management technology as a core NFS offering as well. The report which covered surveys among major banks across the East Asia Pacific, Europe & Central Asia, Latin America & Caribbean, Middle East & North Africa, North America & Western Europe, South Asia, and Sub-Saharan Africa identifies four best practices in the design and execution of W-SME-focused NFS, which banks looking to capitalize on this opportunity can follow. These practices include:
- Tailor the proposition to the needs and profiles of different customer segments
- Provide an integrated, one-stop experience for financial and non-financial services
- Build institutional alignment to drive results
- Integrate measurement into programme design and delivery
But with the coronavirus pandemic sweeping across the globe and resulting in a slowed economic activity and great uncertainty, banks that support their women-led SME clients with a combination of tailored financial and non-financial services will not only give support to economic recovery but help defend the long-term bottom lines of these small and medium scales enterprises as well.