Product and Process Innovation for Better SME Finance

December 30, 2019

Kathmandu: To unleash the potential of the Small and Medium Enterprises (SMEs), the segment known to have a significant impact on the country’s economic growth, UKaid Sakchyam Access to Finance programme has been working with a number of commercial banks to meet the sector’s financial needs.

Sakchyam has partnered with banks to increase their outreach in remote areas and to utilize and leverage alternate delivery channels, helping them to design suitable products and services and supporting them to streamline their lending processes.

Two banks with SME specific partnership projects with Sakchyam — Siddhartha Bank and Nabil bank – have been following a holistic approach to serve SME segment in a focused manner and one key area of this partnership involves product and process innovation to serve the SMEs effectively.

Nabil Bank

Nabil Bank with support from Sakchyam has been working towards strengthening their SME portfolio and have already launched three financial products — Nabil Nari Karja targeting women-run enterprises, Nabil Sajilo Karja targeting smaller enterprises with sales turnover up to NPR 25 million and Nabil Sajilo Express Karja based on scorecard model for credit assessment. These products are bundled with many key benefits targeted specifically to cater to the needs of SMEs, including transaction alert through SMS, monthly statement, critical illness insurance coverage through Nabil Care and credit card facility.

Recently, the bank introduced Nabil Express Sajilo Karja – an SME lending product based on Credit Scoring model. The first of its kind to be launched in Nepal, the bank will use the Credit Scoring model to speed up the credit approval for SME clients. Under the product, the bank has assured that the decision on the credit will be delivered within 35 hours of the submission of the application. Nabil Express Sajilo Karja applies to the loan size of up to NPR 7.5 million and the bank will provide risk-based pricing with a maximum interest rate of 10.50% which will remain unchanged for the first year. The bank has disbursed NPR 5,756,459,872 to 780 SME under this project.

Designing and Implementing an SME Focused Strategy to Enhance Banking Services for SME Segment in Nepal

Siddhartha Bank Limited

Siddhartha Bank has launched four financial products catering to the SME segment – Saral SME Loan, Siddhartha Mahila Udhyamsil Karja, Siddhartha Commercial Agriculture and Livestock Loan and Siddhartha Reverse Factoring Facility – under the partnership project with Sakchyam. Saral SME Loan caters to small scale business enterprises engaged in agriculture, tourism, retailing and service sector. With the launch of this loan, the bank aims to enhance the access to formal financial services among the small enterprises; such small scale businesses often rely on local lenders for credit which has high-interest rates.

Similarly, Siddhartha Mahila Udhyamsil Karja is an interest-subsidized loan for small enterprises operated and led by women; it intends to fulfil the requirement of finance for such businesses. This credit product is designed as per the guideline provided by ‘Unified Guidelines, 2075 for Interest Subsidy on Subsidized Loan’ by Nepal Rastra Bank. The bank has disbursed NPR 9,289,037,600 to 3,588 SME under this project.

Meeting the Financial Needs of MSMEs Through Innovative and Sustainable Approach