During our banking transformation or new business creation engagements, we often face the question – What is the best business model for SME Finance?
The answer is short- there is no ‘best’ model that fits all.
The business model needs to be built based on opportunity, constraints and long-term objectives of the bank/lender. Even within the same geography, approach to SME lending may vary depending on the target sub-segments. In one of my earlier posts, I had advised against considering SME as a homogeneous or monolithic customer segment. Instead, you may visualise ‘SME’ as a castle-wall made of stones of inconsistent size and density. Interestingly, the wall itself is of varying thickness and height! The ‘victory model’, therefore, depends on which side of the wall you wish to surmount!
Nevertheless, there are a few global ‘Best Practices/ Dos and Donts’ which are universal and applicable to anyone building a sustainable SME lending business. In this series of 10 posts on SME Lending model, I share the nuances of building SME Lending business.