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SMEs

Creating Value for SMEs in emerging markets

SMEs are key drivers of growth and job creation across emerging markets. We are committed to supporting these vital companies and have been offering dedicated financial services to SMEs across Asia, Africa and the Middle East for more than a decade. During the most recent financial crisis, we demonstrated our long-term commitment to SMEs by partnering with several governments to ensure a continued flow of credit. Despite the crisis, we increased our lending to SMEs substantially. In 2010 our SME lending rose by 32 per cent to almost USD18 billion.

Supporting SME trade

To expand, SMEs need to be able to trade beyond borders. In 2010, we focused on enhancing our trade business, supporting SMEs with dedicated products and services such as foreign currency accounts, international payments services, letters of credit, bonds and guarantees. While global trade fell in 2009 and in 2010 failed to recover fully, we grew our SME trade business by 25 per cent in 2010.

Identifying customer requirements

In 2009, we commissioned comprehensive customer research to better understand the requirements of SMEs in our major markets. The research showed that SMEs are looking for knowledgeable bankers, hassle-free banking services and expert solutions that meet their needs. As an example, SMEs – many of whom were negatively affected by fluctuating interest rates, currencies and commodity prices during the financial crisis – require banks to help them with risk management, in addition to addressing their needs for working capital, turnover expansion, business protection and yield enhancement.

Strengthening our customer proposition

In response to the changing needs of SMEs, we have strengthened our SME Banking customer propositions, creating differentiated solutions for small businesses (turnover of up to USD10 million) and medium-sized enterprises (turnover between USD10 million and USD25 million). We understand that the needs of smaller and larger SMEs are different and have tailored our solutions accordingly, combining expertise from both our Consumer Banking and our Wholesale Banking businesses.

We aim to be the main bank for our larger SME customers, providing products and services to suit their business needs. They will be supported by dedicated Relationship Managers, who are backed by teams of specialists in trade and cash management, treasury and investment, bancassurance (bank insurance), and cross-border expansion. For our smaller business customers, our main focus is on providing easy access to banking with simplified solutions and convenient transaction services.

In 2010, we launched our strengthened SME Banking customer propositions in India, China and Hong Kong. In 2011, we will be rolling them out across our other markets.

SMEs: Case study

Supporting SME Waste to Energy project in India

Waste and pollution are major issues in India and increasingly high on the public agenda. Plants that convert waste to energy can offer businesses and municipalities a cost-effective way of safely disposing of waste, while addressing soaring demand for energy.

Rochem Separation System (Rochem) – a medium-sized Indian enterprise with an established business in reverse osmosis water treatment systems – was looking to develop a waste to energy business. As the technology was still relatively new and involved considerable risk, the company needed to invest in a working prototype. This meant significant up-front investment, for which Standard Chartered provided the financing.

Standard Chartered subsequently worked with Rochem as one of a number of banks to develop a solution that enabled the company to import the required machines for the waste to energy plant, commissioned by the Pune Municipal Corporation. We provided a USD4.5 million Letter of Credit, a crucial facility in international trade when the transaction value is significant and the buyer and seller are in different countries.

The transaction benefited both Rochem and Standard Chartered. Rochem was able to initiate the development of a new business area, generating energy from waste. The company had all its banking requirements met by three banks and avoided spending time and money seeking financing from numerous financial institutions. Meanwhile, the deal enabled us to deepen our relationship with an important existing client.

Financing environmental projects is part of our commitment to reduce the environmental impact of our transactions and consciously contribute to a low-carbon economy. Green SME financing is a new business area for us, and the Rochem waste to energy plant provided a learning platform, paving the way for future investment.

SMEs: Case study

Enhancing the competitiveness of SMEs and contributing to the Millennium Development Goals

In 2009, Standard Chartered partnered with the International Finance Corporation (IFC) to deliver a pilot SME training programme in Pakistan. In 2010, a similar programme was delivered in Kenya. Both programmes are designed to help SMEs develop crucial knowledge on financial management and banking procedures.

For Standard Chartered, the training programmes have emerged as a differentiator in a competitive SME banking market. They have also helped us deepen our relationship with existing SME clients.

The programmes highlight our support for the Business Call to Action, an international initiative launched in 2008 to encourage the private sector to use its core skills to accelerate progress towards meeting the Millennium Development Goals (MDGs). The MDGs are eight international objectives agreed in 2000 by the United Nations, governments and donors to collectively address the world’s development challenges by 2015.

In 2008, our Group CEO Peter Sands announced our commitment to provide business training to SMEs as a means of supporting the growth of SMEs and the contribution of SMEs to their local economies, as part of our commitment to further the MDGs.

The Kenya programme focuses on SMEs in the growth phase of the business cycle and is designed to strengthen financial management skills. It includes a training course for 34 SMEs, of which 32 per cent are owned by women. Some 80 per cent of the SMEs are existing customers of Standard Chartered.

The course was launched with a survey to measure the baseline level of understanding of financial planning and analysis among the participating SMEs. A two-day workshop was subsequently held in Nairobi. This was based on the IFC’s BusinessEdge training programme and included basic financial planning along with elements of financial reporting and analysis of financial statements.

A follow-up training session will be held in spring 2011, and participating SMEs will receive ongoing mentoring from Standard Chartered Relationship Managers until November 2011. Two post-training assessments will be conducted.

Annual Report and Accounts 2010