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Charles B. Wendel New Technologies for SME Finance The World Bank December 4, 2002

Financial Institutions Consulting. Products and Services with a Proven Track Record for Adding Value in SME Finance. Charles B. Wendel New Technologies for SME Finance The World Bank December 4, 2002. Panelists. Charles Chemel Director, Strategic and Product Development

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Charles B. Wendel New Technologies for SME Finance The World Bank December 4, 2002

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  1. Financial Institutions Consulting Products and Services with a Proven Track Record for Adding Value in SME Finance Charles B. Wendel New Technologies for SME Finance The World Bank December 4, 2002

  2. Panelists Charles Chemel Director, Strategic and Product Development Standard Bank of South Africa, Limited Klaus Glaubitt Chairman of the Board of Directors Microfinance Bank of Serbia and Montenegro Member of the Board of Directors Micro Enterprise Bank, Kosovo Manuel Montoya Director and General Manager Mibanco, Peru Charles Wendel President, Financial Institutions Consulting, Inc. New York City

  3. FIC overview Financial services companies offer banks many products, but… • Credit • Line of credit • Cards • Leases • Commercial and mortgage • Equipment loans • Transaction • Current accounts • Payroll • Bill payments and presentment • Debit cards • Investments • Short-term investments • Retirement plans Small Business Customer • Advisory • Business procurement • Succession planning • Accounting • Financing planning • Tax • Insurance • Property and causality group health • Group life disability

  4. …most small businesses require only a small number Small Business Product Use Non-Core Core

  5. Profitability is largely deposit driven U.S. Small Business Profit Distribution Small Business Profitability 100% All Others 5% Loans 10-15% Deposits 70-85%

  6. The deposit/loan ratio largely determines the degree of small business ROE Small Business Profitability 40% 20% 0% Bank B Bank C Bank A Small business unit ROE 1:1 2:1 3:1 4:1 5:1 Deposit-to-loan ratio Source: First Manhattan Consulting Group

  7. Generally, the more products sold, the greater the profit contribution Relationship Between Contribution and Number of Products No. of products Contribution Source: Oxford Information Technology, Ltd.

  8. Small businesses want to have branch access “What Is the Primary Method for Conducting Your Company's Business Banking?” Business Banker Telephone Internet/Online Branch

  9. While branch access is key, online users surpass off-line customers in balances and loans outstanding Average Current Account Balances per Customer Average online current account is 2.8 times higher than average current account Similarly, the average loan outstanding form online customers is two times greater than the average ($87,000 vs. $42,000)

  10. Online bankers also use more products and register increased satisfaction Average Number of Accounts per Customer Average online customers’ number of accounts is 1.8 times higher than average number of accounts

  11. Issues for discussion • What do bankers view as the key products for today and for the future? • Where are the key profit generators? • How are SMEs in the various markets sold and serviced? Primarily by Relationship Managers? Branch Managers? • How effective has Internet banking been so far?

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