As part of its global financial markets consulting practice, FMI has developed an innovative software program, Global Financial Bridge, to facilitate communication between SMEs and banks on the key components of analyzing creditworthiness and cash flow lending. This user-friendly software program and related educational methodology can assist banks and SMEs with accounting, cash flow management, and lending. The software tool presents financial information in a way that is understandable to both banks and investors, bridging the gap between SMEs and commercial banks by enabling them to converse on profit and loss, cash flow, financial projections, and credit worthiness. It permits the banker to evaluate financial risk with graphs and scorecards and analyze SMEs quantitatively (financial ratios, cash flow projections, profitability) and qualitatively (credit risk scoring). The banker and the SME can then use the software to communicate effectively, explain the impact of business decisions in an interactive manner, and manage loans with actual versus projected performance.
Selected examples of FMI’s experience utilizing Global Financial Bridge, to mobilize capital for SMEs include:
Financial Operations Results-Jordan project (FOR-Jordan) FMI’s FOR-Jordan was implemented as part of the U.S. State Department’s Middle East Partnership Initiative and led to measureable improvement in the ability of Jordanian banks to lend safely and confidently to SMEs. It also increased the competitiveness of Jordanian SMEs, providing them with user-friendly tools which facilitated internal financial management and external lender relations. FMI integrated the needs of SMEs and banks in Jordan by delivering customized initiatives in three areas: 1) training and assisting SMEs to implement restructuring and competitiveness improvement techniques; 2) improving the ability of SMEs to access finance; and 3) assisting banks to profitably lend using FMI’s methodology.
The FMI methodology for assisting SMEs consisted of intensive training in financial management concepts, and instruction on how to present financial information to banks using in readily “bank-acceptable” form. This was achieved by using FMI’s SME/Bank Evaluator software. In addition, FMI integrated classroom training, case studies using actual examples from Jordan, and a networking activity to help banks and SMEs to develop mutually beneficial relationships. This approach emphasized the importance of improving both SME creditworthiness and the efficiency of the bank lending process. By focusing on both the supply and demand, FMI helped Jordan improve its SME lending environment. Three integrated activities were implemented in Jordan:
- Bank Training: Equip bankers with better credit assessment and monitoring capabilities and provide specialized risk management techniques to enhance profitable lending to SMEs.
- SME Training: Assists SMEs to clearly and accurately present their financial position and projections to potential lenders and investors in a uniform, International Accounting Standards (IAS) compliant format. Like typical SMEs, Jordanian SMEs frequently lack well prepared financial statements or experience in presenting them to lenders.
- Public Awareness/Alumni Networking: To ensure a sustained impact, FMI established alumni networking events for participants to discuss issues associated with SME lending. These networking seminars bring together bank and SME participants, thereby facilitating business introductions and possible credit activity. The public awareness campaign also promotes the benefits of the program through media exposure of success stories.
FOR-Jordan trained over 370 participants from 250 SMEs and over 80 bankers from 17 banks, causing $10 million in financing to SMEs as a result. FMI continues to provide training and software support to FOR-Jordan and its sustained partner the Business Development Center, a local NGO who received ownership and licensing for roll-out to a broader audience, and continues to expand its impact in Jordan.
Palestine (West Bank) Financial Sector Development FMI
served as the principal USAID adviser on financial sector development issues, including successful technical assistance in banking, SME lending, non-bank financial institutions development, and capital markets regulation. FMI worked with local SMEs on improving internal financial and business management practices, improved the legal and financial environment, and created new financial products and tools to help spur business growth and job creation.
This project included the groundbreaking Emergency Loan Program (ELP), designed and implemented by FMI in close collaboration with local partners in the banking and business communities. Under ELP, FMI developed and implemented a process whereby two leading local banks were selected, $5 million disbursed with 2:1 matching of funds by lenders, and a vital infusion of capital provided to SMEs determined to be creditworthy via the FMI analysis. Simultaneously, FMI introduced and insisted upon new underwriting criteria for participating banks to make SME loans. This yielded a 100% repayment rate. Selected accomplishments include:
- A comprehensive assessment of non-bank financial institution (NBFI) activity, including identification of near to medium term initiatives in the leasing, mortgage finance, insurance and pension sectors designed to create jobs and increase access to capital for SMEs.
- A breakthrough in mortgage finance emphasizing private law solutions to intractable problems, leading to homes for families, jobs and a model for solving a recurring problem.
- Introduced a “Financial Sector Restructuring Program” to address the growing problem of SME insolvency, including work with banks and SMEs on loan management, financial planning, and value chains.
“FMI has a methodology that allows the bank to evaluate financial risk,
arrive at a credit score, perform loan management, and reduce transaction costs.”
Iris Dempsey, CEO, FNB Commercial Banking
“FMI understands bank’s needs for assessing SME financial risk.”
Simone Cooper, Manager BEE Lending, Standard Bank
“Banks are not inclined to do extensive analysis of the SME.
FMI’s methodology can change the lending culture.”
Stuart Grobler, General Manager, The Banking Association of South Africa
For more information on FMI’s methodology and approach to SME development and SME access to finance, please click here.