Library Videos Pitfalls of SME Lending

Pitfalls of SME Lending

27 Nov 2013 4447

Microfinance banks and MFIs generally venture in to SME financing without understanding the model and common pitfalls, which might result in losing the portfolio. In this episode, MicroSave's Specialist, Venkata N. A., discusses the common pitfalls of SME financing. In his words "SME financing is completely different from Joint Liability Group model of lending. It has different HR requirements, different organisational structure, different MIS requirements etc." The common pitfalls are lack of financial statements, lack of industry benchmarks, lack of credit history, lack of skilled appraisers and one size fits all dilemmas. It is very important for any institution to understand the pitfalls of SME financing and also to conduct institutional assessment before venturing in to it.

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  • JR

    Getaneh Gobezie, Private Enterprise Programme Ethiopia (PEPE) on 28/11/13

    Dear colleague ... Very much thank you for raising this very important issue. ... Many MFIs which have been doing micro level group-lending modality would like to venture into MSME ''individual lending'' modality, with the view to meet the demands of some of their 'graduating' clients, who wish to access 'higher' loan sizes on individual basis. ... But (as you rightly pointed out) these MFIs have no skill on appraising project proposals of this type -- they have effectively been delegating such appraisals to the 'group members' (who appraise, and monitor, each other). Also they have no MIS, staff incentive scheme, etc, etc for such processes. .... This is what we found as we try to do capacity building in the new Private Enterprise Programme Ethiopia (PEPE). ... I hope we can share more ideas on this .... Regards, Getaneh (Mail: getanehg2002@yahoo.com)


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