How Non-Financial Services are Empowering SMEs

NFS platforms and Commercial Bank Partnership

Welcome to our latest blog post where we delve into the fascinating world of SME banking. During our latest SME Finance Marketplace on January 22, we invited three NFS platforms: International Trade Center, Strands, and Silver Lining to talk about the services they offer to SMEs, from business management tools to networking, education and access to markets and how they partner with banks to roll those out.

Non-financial services are becoming increasingly important for small businesses (SMEs) as they face a variety of challenges, including limited access to finance, lack of financial literacy, and difficulty in navigating complex business ecosystems.

Challenges Faced by SMEs:

• Lack of Tangible Assets or Collateral: SMEs often struggle to meet the lending requirements of commercial banks due to a lack of tangible assets or collateral.
• Limited Access to Networks: SMEs may lack access to networks that connect them with financiers, investors, and other businesses.
• Societal and Cultural Challenges: Women, youth, and entrepreneurs in rural areas may face specific challenges in accessing financial services.
• Limited Financial Literacy: SMEs may lack the financial literacy needed to understand and manage their finances effectively.
• Difficulty in Assembling Documentation: SMEs may struggle to assemble the required documentation from banks to access finance.
• Informal Sector Challenges: SMEs in the informal sector may face additional challenges due to a lack of credit history and proper financial documentation.

The Role of Non-Financial Services:

Non-financial services can help SMEs overcome these challenges by providing them with the tools, resources, and support they need to succeed. These services can include:

• Information and Education: Providing SMEs with information and education on financial management, business planning, and other relevant topics.
• Advice and Mentoring: Offering SMEs access to expert advice and mentoring from experienced business professionals.
• Networking: Connecting SMEs with other businesses, investors, and potential partners.
• Digitization and Technology: Providing SMEs with access to technology and digital tools that can help them improve their operations and efficiency.

Examples of Non-Financial Service Providers

The session showcased several innovative solutions, focusing on financial management tools, capacity building, networking, and gender lens financing. that are addressing these challenges:

• ITC's SheTrades Initiative: ITC works directly with SMEs to provide business support tools, technical assistance, and de-risking services to help them access finance. This initiative focuses on empowering women entrepreneurs through financial literacy training, market access opportunities, and mentorship programs. Absa Bank has been rolling out this program successfully in Keny through their annual women entrepreneur conference ‘InspireMe’ and their industry-specific visits that facilitate best practices sharing, market linkages and business connections.
• Strands' Compass Solution: Strands provides a platform called Compass that helps banks acquire and enrich data from multiple sources, providing them with insights into SME performance and enabling them to offer tailored financial services. Strands has partnered with HSBC, Akbank and Banco BPM to implement that tool
• Silver Lining: Silver Lining offers a SaaS platform that provides SMEs with comprehensive and consistent support, including software, templated campaigns, AI-driven customized campaigns, human interventions, and access to loans.
  This platform provides SMEs with a comprehensive suite of tools and resources to manage their cash flow, build profitable revenue, and connect with other businesses. Silver Lining is partnering with Saudi Fransi to craft a national strategy that brings a NSF provider, major bank and local governments and economic development together. Saudi Fransi is leveraging NFS to support SMEs and ensure their sustainability, working with government agencies and philanthropic organizations to create a robust ecosystem.

The Power of Collaboration

Public-private partnerships are essential for scaling up non-financial services and making them accessible to a wider range of SMEs. These partnerships can help to:

• Fund the development and delivery of non-financial services: We need to continue to develop and refine NFS solutions that address the specific needs of SMEs.
• Create a more supportive ecosystem for SMEs: platforms and programs that connect SMEs with potential customers, suppliers, and mentors is essential for their growth.
• Promote innovation and collaboration in the non-financial services sector.

This session emphasized, through three distinctive case studies in different parts of the world, the importance of collaboration between financial institutions, governments, and non-profit organizations to effectively support SMEs beyond access to finance.