access to credit

It is well recognised that the SME sector contributes considerably to employment generation, national output, innovations, regional development. To facilitate the role of the SME sector as a development trigger, it is important to provide adequate access to credit and other financial sources. Rural finance is considered to be a vital tool in poverty reduction and rural development. There are a number of instruments aimed at provision of access to credit to SMEs and rural businesses, from provision of favourable credit lines through commercial banks to fostering development of credit cooperation.

The range of problems faced by micro and small enterprises in the developing countries while applying for financing includes:

• Lack of collateral;
• Limited quality of credit applications
• Lack of proper company and credit history;
• Lack of adequate bookkeeping; 
• Limited availability of suitable loan products;
• Limited knowledge of credit officers especially in rural business and farming activities;
• Complicated and non – transparent decision taking process in financing institutions;
• Limited business interest of banks in crediting in general and in lending to (rural) SME especially;
• High management costs in financing institutions;
• Underdeveloped repayment mentality;
• High interest rates allow only financing of working capital, internal rates of return for medium and long-term investments are lower than interest rates.

Based on the experience collected during numerous projects we have developed the concept of inter-relation between rural enterprises/SMEs, banks and consultants, aimed not only to improve access to finance for rural population and small businesses but also to support a credit applicant with proper advisory service.

ABG experience in the sector covers:

• Establishment of institutional and legal framework for banking, microfinance, stimulation of SME access to finance;
• Business planning for small and medium enterprises and elaboration of investment concepts;
• Institutional development, promotion of policy changes, attraction of investors, formation of advisory networks for exchange of know how and information;
• Direct advice and consulting to commercial banks in institutional set-up and restructuring, corporate governance, risk management, business planning, development of new services and financial product;
• Long-term track of developing credit products and programs for specific target groups according to their needs, defining lending criteria and procedures to support their implementation;
• Establishment of new and restructuring the existing banking and non-banking financial institutions and extensive assistance to institution-building, including set-up of internal structure, definition of service package, design and implementation of financial and risk management concepts and procedures, establishment of accounting and auditing systems, introduction of corporate governance principles;
• Set-up of rural credit institutions;
• Development of credit cooperation.