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Why banks are turning into ’business schools’
2005-11-23 07:56:50
By mireny john
The wind of change is blowing across Tanzanian banks. The majority of major banks are slowly, but surely turning themselves into business schools.
Of late, there has been a strong resurgence of interest among the bankers, all of them trying to accommodate small and medium enterprises (SMEs) as potential customers now and in the future.
Reading the signs of our times, these banks are not taking chances, but seem to have conjured a palpable strategy of survival over the somewhat rugged financial market of an emerging economy.
Throughout transition economies, including those that can be adjudged as getting to some stage of maturity like the Chinese economy, the driving economic actors are SMEs.
Since efforts to restructure the economy gained perceptible momentum from early 1990s, SMEs have mushroomed in both production and service sectors, some informal, while others are formal.
Their role in keeping the economy leaping forward is easily told by its actual ability in employing a third of this country’s active labour force, while generating 20 percent of our Gross Domestic Product (GDP).
These hard facts tell why major banks are refocusing on SMEs as special market avenue with strong potential for growth.
However, of great interest to market observers, the approach that has been adopted by all banks now cudgeling SMEs as potential partners in business is, by incidence or coincidence, very much similar.
Commendably, several banks have resolved to offer, free of charge, business management training services to SMEs.
It sounds interesting for a boutique maker to be drilled in topics such as business plan preparation and implementation, book keeping, human resources and inventory management, marketing strategies and the like.
This brand of private sector engagement is unorthodoxy to be witnessed in a market-led economy where everybody goes for oneself and only God caters for all.
In the short-run, banks are taking risks based on the principle of reciprocity — the give and take scenarios— though over the longer run, banks are set to cash in from the consolidation of SME activities.
The Small Industries Development Organisation (SIDO) has also embarked on a nation-wide training programme for SMEs with a view to enhancing their managerial and productivity efficiencies.
Banks are putting themselves out to training SMEs because of grand surety behind them. The government has set up an SME Guarantee Fund that is guided with a palpable SME policy.
These banks are the participating financial institutions (PFIs) to the scheme, meaning potential SMEs will have to forward their loan applications to PFIs for consideration.
The Bank of Tanzania (BoT) oversees the SME Guarantee Fund in such a way that in the event of technical defaults, the PFIs will be entitled for genuine refunds.
The bankers’ strategy seems to help SMEs minimize rates of default by providing basic management training to SMEs whose market potential looks unlimited.
And so banks are turning into business schools, with a noble reason.
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