Small and medium enterprises (SMEs) form a core sector of the Indonesian economy (Source: jakartaglobe.id)Jakarta (VNA) - Small and medium enterprises (SMEs) form a core sector ofthe Indonesian economy and contribute significantly to economic growth, jobcreation and innovation, stated an article of the Jakarta Globe onlinenewspaper.
Theauthor, Ernest Saudjana, Managing Director at Jakarta-based Boston ConsultingGroup, said given the importance of this segment to the country'seconomy, the Indonesian government has promoted growth of SMEs by encouragingbanks to increase their SME portfolio.
Notably,a digital strategy will especially allow banks to build smarter salesoperations and streamline processes, generating unexpected rewards and gainingsignificant commercial advantage.
Since 2000, financial technology (fintech)providers have poured more than 50 percent of their investments into corporatebanking, including the SME segment. Meanwhile,some banks have started to offer more digital solutions for smallerbusinesses.
Choosingthe right digital strategy has also become even more crucial, since a strongerdeposit and payment franchise can generate valuable transaction data fromcustomers.
Analysingdata will also enable banks to improve credit risk modelling and loantracking, helping them to resolve the historical bugbear of SME banking: highlevels of non-performing loans.
Incomefrom SMEs accounts for almost 20 percent of Indonesian banking revenue.
Boston Consulting Group’s Corporate BankingPerformance Benchmarking report showed banks have a significantopportunity to improve their performance in the sector.
Bankscan expect to boost their SME revenues by 20 percent to 25 percent,reduce costs to serve customers by 30 percent to 50 percent and paredown the number of their nonperforming loans from SMEs if they take all fouractions recommended by the report, including tailor products and services;improve and expand their digital platforms; optimize pricing; manage andcontrol discounting and waivers; and digitise processes and speed up creditapplications.
Bankscan obtain returns that are comfortably over the cost of capital in the SMEsegment, with some caveats.Only banks that realise the SME segment’s valueand crucial role will be able to create and maintain a competitive advantage.-VNA
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