(A partnership between UKaid Sakchyam and Nabil Bank Limited)
Nepal is no different to many other countries in facing significant challenges in supporting the Small and Medium Enterprises (SME) segment. Lack of coherent and consistent definition at the policy level, absence of supportive functions such as a robust credit guarantee mechanisms and lack of segment specific strategies at the level of financial service providers – all of these are the barriers to effective growth of Micro, Small and Medium Enterprises (MSME) sector in Nepal.
Through Macro to Meso level interventions Sakchyam has been designing and delivering a range of initiatives that aim to overcome these barriers and challenges. Through ‘push & pull’ approach – seeking proposals through RFPs in specific areas of downscaling and by reaching out to ‘capable’ and ‘interested’ Financial Service Providers (FSPs), Sakchyam has forged a number of meaningful partnerships with various FSPs in this area. Sakchyam’s recent understanding with NABIL bank is a step in the same direction and follows the same pattern and methodology.
Nabil Bank was one of the first commercial banks in Nepal to realize the potential of SMEs and take a definitive step towards serving the segment back in 2008. It already has a sizeable chunk (around NPR 25 billion) of its portfolio built around SME segments and has recorded a robust year-on-year growth so far. Despite being one of the leading banks in this area of lending, there were a number of issues and challenges that the bank was facing with regard to its ability to reach out to the SME sector:
- Lack of consistent definition (beyond standard loan size definition) of SME. This clouded the bank’s ability to see the true business potential of the SME sector.
- Absence of appropriate segmentation within SME sector.
- Lack of differentiation in products and processes.
- Absence of sales culture and appropriate utilization of delivery channels.
- Traditional approach to credit process and risk management.
After receiving request for support and technical assistance (TA) from Nabil Bank, Sakchyam held a number of meetings with the bank’s top ranking officials including CEO. This led to an understanding between the bank and Sakchyam to conduct a ‘Diagnostic Survey of SME Sector’ of the bank. Sakchyam provided required TA and completed the ‘Diagnostic Review of the SME Sector’ of the bank in July, 2018. The review enabled the bank to identify a number of gaps in its products, loan processes, promotional and sales approaches, and segmentation strategies. It also enabled the bank to identify the proper tools and activities to overcome those gaps.
In line with the recommendations of the ‘Diagnostic Review’ the bank has decided to overhaul its existing SME approach and design a new approach focusing on the SME sector specifically. The partnership between Nabil Bank and Sakchyam, will enable the bank to
- Establish a clear business model for dedicated SME Hub.
- New ‘client focused’ definition for SME sector and subsequent market segmentations.
- Credit process enhancement (includes adoption of loan work flow software, credit scoring model for SMEs).
- Design/re-design products targeting needs of SME clients.
- Streamlined approach towards sales and market development.
As of March 2021, Nabil Bank has:
- Established a dedicated SME Hub
- Redesigned the loan workflow and redefined the definition of SME on the basis of sales turnover
- Launched 3 SME products under Sakchyam’s partnership namely Nabil SajiloKarja, Nabil NariKarja, and Nabil Sajilo Express Karja (based on credit scoring model)
- Reached 40 districts and 926 beneficiaries.
- Disbursed loan amount of more than NPR 5.7 billion