Small Businesses Need Innovative Access to Capital and Training in Business Competence

A few people around the world get it when it comes to economic development. They disdain bald protectionism and subsidies and emphasize what's really important to small bizs: access to capital and training in entrepreneurship. From the Jakarta Post, here's one of the leading business experts and economists talking about what Medium to Small (Business) Enterprises, aka MSMEs, really need:

I think the approach used so far in nurturing MSMEs has been inappropriate because most of the programs emphasized subsidies and protection from market competition. This is the wrong way to nurture MSMEs.

In our experience at Bank Mayapada, MSMEs don't need charity, subsidies and excessive protection. What they mostly need is easy access to financing and technical extension services (consultancy) on various aspects of their business operations.

They don't have assets as securities for loans and they are not comfortable with, and sometimes even hate, arduous bureaucratic borrowing procedures.

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We design our lending programs specifically to meet the special characteristics of MSMEs. Hence, we don't focus on collaterals but cash-flow or revenue-stream prospects based on their business feasibility.

We have developed a body of experienced experts to assess the MSMEs' commercial viability. We have opened what we call the Mayapada Business Partnership in various areas.

These business units are assigned to look out for viable MSMEs, nurture them with financial and technical assistance and constantly monitor their development and their needs as they continue to grow and expand. Each business unit also operates as a complete business advisory center. We decentralize credit assessment and decision making to these units.

We expect to operate almost 60 Mayapada Business Partnerships before the end of this year and expect to lend cumulatively Rp 600 billion to MSMEs by the end of this year.

Our rate of non-performing loans in this segment is only 0.58 percent. This means that with the right approach, MSMEs can be viable, creditworthy borrowers able to give banks fairly high net interest margins.

To put it briefly, our approach is market oriented and designed to transfer not only financing capability but, and most importantly, business competence and entrepreneurship to MSMEs.

Here in KY, I think there are two great examples of programs that blend the need for entrepreneurship training and access to capital: the SBDC, which has a longstanding relationship with the Small Business Administration and the KY Innovation Network (I'll admit I'm biased on this one), a program that provides additional access to capital for New Economy companies and the hands on business training that entrepreneurs need.