How Do Banks Serve SMEs? Business and Risk Management Models

This study describes the business and risk management practices that banks use to serve small and medium enterprises (SMEs). To do so, we use recently collected evidence from Argentina and Chile for a significant number of banks in each country, gathered through on-site meetings, a tabulated questionnaire, and a detailed data request. We find that banks are setting up separate departments to serve the segment, targeting many SMEs from all economic sectors and geographic regions. Banks use relationship managers to seek out new clients. Risk management and loan approval is separate from sales, mostly centralized, but not largely automated. Knowing the client is still crucial to minimize risks. Overall, the patterns we uncover suggest that banks are in the middle of an on-going learning process, by which they are developing the structure to deal with SMEs in a sustainable basis over the coming years.

Bibliographic Details

Main Authors:	Martínez Pería, María Soledad, de la Torre, Augusto, Politi, María Mercedes, Vanasco, Victoria, Schmukler, Sergio L.
Language:	English en_US
Published:	World Bank, Washington, DC 2008-06
Subjects:	ACCESS TO FINANCE, ACCOUNTING, AMOUNT OF LOANS, AUDITORS, AUTONOMY, BALANCE SHEETS, BANK CREDIT, BANK FINANCING, BANK LENDING, BANK POLICY, BANK REGULATIONS, BANKING PRACTICES, BANKING SECTOR, BANKING SYSTEM, BANKRUPTCY, BANKS, BORROWER, BRANCH LOCATION, BUSINESS CENTERS, CAPITAL REQUIREMENTS, CASH FLOW, CASH FLOWS, CASH MANAGEMENT, CENTRAL BANK, CENTRAL BANKS, COLLATERAL, COLLATERAL REQUIREMENT, COLLATERAL REQUIREMENTS, COMMODITY PRICES, COMMUNITY BANKS, CONSUMER LENDING, CONSUMER LOANS, CREDIT ANALYSIS, CREDIT BUREAU, CREDIT BUREAUS, CREDIT CARD, CREDIT LIMITS, CREDIT LINES, CREDIT MARKET, CREDIT PRODUCT, CREDIT QUALITY, CREDIT RISK, CREDIT RISK EXPOSURE, CREDIT RISK MANAGEMENT, CREDIT SCORING, CURRENCY, DEBT, DEBT OUTSTANDING, DEBTOR, DEBTORS, DEFAULT CASES, DEFAULT PROBABILITY, DEPOSIT, DEPOSITS, DEVELOPING COUNTRIES, DOMESTIC BANKS, ECONOMIC ACTIVITY, ECONOMIC DEVELOPMENT, ECONOMICS, EMERGING ECONOMIES, EMERGING MARKETS, EMPLOYMENT, EXCHANGE RATE, FINANCIAL ANALYSIS, FINANCIAL DEVELOPMENT, FINANCIAL INSTITUTIONS, FINANCIAL NEEDS, FINANCIAL RISK, FINANCING OBSTACLES, FOREIGN BANKS, FOREIGN EXCHANGE, FORGIVENESS, INDEBTEDNESS, INDIVIDUAL LOAN, INTEREST RATE, INTEREST RATES, INTERNATIONAL BANKS, INTERNATIONAL FINANCE, INTERNATIONAL FINANCE CORPORATION, JUDICIAL PROCESS, LACK OF ACCESS, LEGAL CONSTRAINTS, LENDING DECISIONS, LIQUID ASSETS, LIQUIDITY, LOAN, LOAN AMOUNT, LOAN APPLICATIONS, LOAN APPROVAL, LOAN APPROVAL PROCESS, LOAN DECISION, LOAN OFFICER, LOAN PRODUCTS, LOAN RECOVERY, LOAN REPAYMENT, LOAN REQUESTS, LOAN VOLUME, LONG-TERM LOANS, LOW INTEREST RATES, MARKET SHARE, MARKET STRUCTURE, MICRO-ENTERPRISES, MONEYLENDERS, NET WORTH, NON-PERFORMING LOAN, NON-PERFORMING LOANS, NONPERFORMING LOAN, NPL, OVERDRAFT, OVERDUE LOAN, PERSONAL GUARANTEE, PLEDGE COLLATERAL, PORTFOLIO, PORTFOLIOS, PRIVATE BANKS, PRIVATE SECTOR LOANS, PROBABILITY OF DEFAULT, PROFITABILITY, PUBLIC BANKS, QUALITY OF ASSETS, RELATIONSHIP LENDING, REORGANIZATION, REPAYMENT, RISK ASSESSMENTS, RISK MANAGEMENT, SECURITIES, SHARE OF INVESTMENTS, SIGNATURE LOANS, SMALL BANKS, SMALL BUSINESS, SMALL ENTERPRISES, SMALL LOANS, SOLVENCY, SOURCES OF FINANCE, TOTAL DEBT, TRANSACTION, TRANSACTION COSTS, TRANSPARENCY, UNION,
Online Access:	http://documents.worldbank.org/curated/en/2008/06/16404267/banks-serve-smes-business-risk-management-models https://hdl.handle.net/10986/12959
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