Fuelling the need of WA’s SMBs October, 2014

WA has more than xx million SMEs contributing significantly to the country’s GDP, exports and employment Turnover cutoff Rs. crore > Micro SME <2 Small SME 2-10 Medium SME Large corporates Mid corporates SME Number of Companies CAGR (no. of co.’s) % 1,500 4, , ,500, ,500, ▪ Contributes to ~39% of country’s manufacturing output ▪ Contributes to ~34% of exports and ~20% of imports ▪ Provides employment to ~68 mn people in rural and urban areas of country SME sector in India

3 SMEs’ financial needs can be broadly classified into three categories Traditionally served Rarely served + – “Enabling day to day business” Conducting daily transactions Managing and investing high cash flow “Creating flexibility and acquiring assets” Managing and financing working capital Acquiring and maintaining assets “Serving stakeholders’ financial needs” SME owner and shareholders SME employees and management SME suppliers and/or customers “Supporting strategic growth” Starting the business Changing the business “Managing business- related risks” Single “isolated” risks Multiparty and complex risks Lifespan of assets and liabilities Lifecycle-based long-term financing needs Complexity of risk protection Complexity of cash management needs Core financial needs Stake- holders related needs Life-cycle related needs SOURCE: McKinsey

4 There are 7 key elements of a successful SME business SOURCE: McKinsey Appropriate customer segmentation and value proposition to ensure different types of SMEs are served according to their needs Business model choice– in terms of traditional lending based vs. liability led vs. technology led (e.g., supply chain financing) Servicing model to ensure rapid turn-around times at low cost to serve (e.g., internet, loan factories) Relationship management and branch architecture to cover and provide specialised services to SME SME-specific risk rating tools in a relatively data-scarce environment using qualitative credit assessment based techniques Suitable operating architecture in terms of centralisations vs decentralisation of mid and back-office functions Putting in place the appropriate organisation construct and business performance management system to ensure the right focus on the segment

5 In summary SOURCE: McKinsey SME is a large, fast growing and attractive opportunity for banks and financial institutions and a significant contributor to the economy Needs of SMEs are evolving rapidly - financial institutions will need to look beyond core financial needs for this segment The segment is very local and can be very profitable for banks – but managing profitability will require a very sound business model Financial institutions will need to create a differentiated model to serve this segment and build excellence in one or more of seven dimensions

Murray Region Futures: Infrastructure, Planning and Population John Gregg A leading Australian consulting group recognised through the success of our clients Principal Navigate Consulting Mobile: +61 (0)