SMEs Financing & Financial Policy SET AUNG 20 th December 2014 Picture sources: blogs.sap.com, pixgood.com

SMEs Problems Multidimensional problems (not just access to finance) – Access to market – Quality and productivity – Access to information – Others More of less the same in many developing countries

Why is SMEs Financing Difficult Picture sources: clipartpanda.com, clker.com, ibom.biz, hackerspace.govhack.org, leansystemsinstitute.com

How Should SMEs Get Financed? Equity Debt Picture source: lindasdailylivingskills.com

Traditional Financing Others’ money Own money Equity Debt Bank loans Bonds

Investment Vs Financing Investors Companies Stocks Investment Financing Projects Investment Bonds

Investors’ Side Direct equity investment at stock exchanges (e.g. AIM) Portfolio investments – Passive investments Small/Large Index Growth/Value Index – Active investments Market timing Investments in fixed-income securities (e.g. corporate bonds, debentures)

Companies’ Side Trade-off theory of capital structure Various sources of debt financing – Banks – Venture capital/ Angel financing – Trade finance (Factoring, discounting) – Leasing – Bonds – Crowd funding

What is Needed for SMEs Financing Information - Credit Bureau system - Banks’ database system - Collateral registration - Credit Bureau system - Banks’ database system - Collateral registration Financial Products & Sources - Banks and NBFIs (Crowd funding in future?) - Factoring, leasing, etc. - SME Fund, Credit line, Guarantee scheme - Banks and NBFIs (Crowd funding in future?) - Factoring, leasing, etc. - SME Fund, Credit line, Guarantee scheme - Bank branches (Mobile banking/payment) Accessibility Lack of knowledge & capacity - Training & awareness (Automated advice?) Collateral - Movable assets registry

Impacts on SMEs Impact of inflation/lowflation/deflation Impact of high interest rate (how can it be mitigated?) & credit crunch Impact of high risk/ high return concept

Impacts on SMEs (Cont’d) Impact of FDIs to change strategy – SMEs Vs. SIs – How to take advantage of AEC Impacts of the exchange rate – Borrowing in FX – Current situation of offshore loans – 1997 financial crisis

Near-Future Positive Impacts on SMEs Once-Stop-Service-Centers Loans from policy banks (including two-step- loans) – SMEs may still get denied (Vietnam’s case) Credit guarantee system Credit Bureau system/ Collateral registration

Future Positive Impact (Cont’d) Trade finance (factoring, discounting, leasing, etc., by banks and NBFIs) Payments and e-Commerce Forwards & Swaps for hedging FX risk

Thank You for Your Attention Picture sources: blogs.sap.com, pixgood.com