Financial Access Bridge
As part of its global financial markets consulting practice, FMI has worked with MSMEs (micro-, small-, and medium-sized enterprises), SMPs (small- and medium-sized producers), and banks on donor-funded training, restructuring, institutional strengthening, and marketing projects. These projects have had demonstrable results in the form of increased profits, decreased problem loans, improved accounting and financial reporting, and expanded businesses.
In the course of this work, FMI has developed an innovative software application to facilitate communication between MSMEs/SMPs and banks on the key components of analyzing creditworthiness and cash flow lending: Financial Access Bridge (FAB). This user-friendly platform and related educational methodology can assist MSMEs/SMPs and banks with cash flow management and successful lending. The software tool presents financial information in a way that is understandable to banks and investors, bridging the gap between MSMEs/SMPs and commercial banks by enabling them to converse on profit and loss, cash flow, financial projections, and creditworthiness. It permits the banker to evaluate financial risk with graphs and scorecards and to analyze MSMEs both 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.
FMI has used FAB as a growth-enhancing tool around the world:
- In Ukraine, FAB is at the core of FMI’s current ground-breaking women-owned SME access to finance program. This program was funded by USAID as a result of a special worldwide competition for innovative approaches to promoting gender equality and expanded opportunities for women.
- In Jordan, FAB helped deliver intensive financial management training to MSMEs and SMPs on how to present financial information to banks in readily “bank-acceptable” form. The training emphasized the importance of creditworthiness and proposed new ways to improve the bank lending process. Using the FAB software tool, FMI trained over 370 participants from 250 MSMEs/SMPs and over 80 bankers from 17 banks, resulting in $10 million in financing to businesses.
- In West Bank and Gaza, FMI developed and implemented the groundbreaking Emergency Loan Program (ELP), which selected two leading local banks to disburse $5 million (with matching USAID funds) using Global Financial Bridge as the credit evaluation tool. This forced banks to develop better underwriting criteria, thereby selecting the most reliable businesses to which to lend. Ultimately, Global Financial Bridged helped yield a 100% repayment rate on loans under the ELP.
- In Nicaragua, FMI quickly mobilized to add a FAB-based access to finance component to an existing trade and competiveness project, through the introduction of the Spanish language version of FAB. This helped expand SMEs access to capital and trade finance.
- In South Africa, FMI implemented a series of training workshops for the Limpopo Business Support Agency (LIBSA), the Guateng Enterprise Propeller (GEP), the Small Enterprise Development Agency (SEDA), and ABSA Bank in South Africa. FAB software was utilized to train over 100 financial advisors and business development specialists on financial risk evaluation, credit scoring, loan management, projection assumptions, and data analysis.
Features of FAB
The functionalities of FMI’s FAB enable banks and MSMEs/SMPs to better converse on profit and loss, cash flow, financial projections, and creditworthiness. The program helps business owners to enter financial data to produce an internationally accepted income statement and balance sheet, and a set of financial ratios. Financial Access Bridge is the perfect program to teach entrepreneurs finance and financial management. It can become an essential tool for generating business plans, providing accurate financial projections, and communicating with lenders and investors. It is an excellent tool for MSMEs/SMPs to improve their knowledge of bank requirements, which will enable access to finance.
The software provides the bank with four key value propositions, enabling the bank to: prospect for quality customers; evaluate financial risk; establish a credit score; and perform ongoing loan management. For bank executives, the software turns data into information. The software allows executives to: view the summary of the bank’s portfolio; examine loan delivery time; review loan officer performance; view new loan accounts added; examine net increase in loan outstanding; mitigate risk on non-performing loans; examine industry trends; conduct benchmarking; and examine variables across industry sectors.
The “What If” functionality allows the MSME/SMP or banker to examine the impact of a decision before it is made. This is invaluable for planning, decision making and setting loan covenants to ensure the loan will be repaid. It also allows for dynamic analysis and decision making capabilities and to communicate the impact on cash flow and profitability by testing different business scenarios, adjusting operating costs, or improving working capital management. Ultimately, this allows the bank to answer key questions, such as: how much does the customer need to borrow? What assurances does the bank have in being repaid? How does the bank monitor loan performance?
FAB also provides a credit scoring system to lend profitably to good customers. This allows banks to establish their own risk criteria by using both Quantitative and Qualitative Credit Analysis with indicators determined by bank policy. FAB uses a probability model to assess SME financial health, assign risk ratings based on international standards, and assign weight percentages according to bank policy.
Financial Access Bridge is specifically designed for easy translation and adaption to different countries and local contexts. It has been translated to Arabic and Spanish, with other language versions currently under development. Around the world, banks, MSMEs/SMPs, and local associations have heralded FAB as an intuitive, useable, reliable, and value-creating tool:
“FMI’s software is excellent for SME risk analysis, cash flow analysis, projection modeling, loan structuring and learning financial analysis in an interactive atmosphere.”
– The Banking Association of South Africa
“FMI’s program will improve our SME financial risk evaluation process and reduce the time it takes us to make a lending decision from months to days, saving us time and money, and allowing us to quickly give a lending decision to our MSME clients”
– Jordanian Business Association