UMB commits to take SME sector to next level

Universal Merchant Bank (UMB) is set to revolutionlise the small and medium-sized enterprise (SME) sector of the country to enable it to contribute more positively to the growth of the economy.

This the bank will do by taking the risk to first galvanise and provide the needed training in small business management, budgeting and financial management for identifiable players in the sector while releasing the necessary funds to support them with business expansion and growth. 

The Chief Executive Officer of the bank, Mr John Awuah, disclosed this in an exclusive interview with the Daily Graphic in Accra to coincide with his first anniversary as the head of the bank.

“As a bank, one of our key strategic objectives is to focus on the small and medium-sized enterprise sector. Research has shown that more than 70 per cent of companies in the country are either small or medium-scale enterprises, so if you are able to unlock the door to this sector, you are well-positioned for significant growth and success,” he said and demonstrated the resolve of the bank to venture into an area where many in competition shied away from.

Mr Awuah, who until his new appointment as the Chief Executive Officer of UMB was the Director of Finance of the GCB Bank, further stated: “We have an aggressive plan for that sector and we will pursue it to the letter.”

Kumasi the starting point

“As I speak we are preparing to launch an SME centre in Kumasi and plans are ongoing to build another one in Accra this year. This clearly demonstrates that we understand what we really have to do to penetrate the SME sector,” he said.

The facility, Mr Awuah noted, “will help the SMEs in the country as it will enable UMB to provide differentiated services to the SME sector and allow us to address their product requirements in a unique and targeted manner. We also plan to organise SMEs with similar risk characteristics and provide them with training programmes that will assist them in mitigating risks associated with their respective businesses”. 

“I do not share in the view that they are not bankable; they are, but they underestimate their potential – some of them often say they do not have collateral meanwhile they may be sitting on assets that can easily serve as collateral,” Mr Awuah said. 

According to Mr Awuah, “Your success rate with the SME sector is directly co-related to your understanding of the SME sector.” 

He acknowledged the enormous challenges within the SME sector, saying: “Though there are problems within that sector, we are also aware that there are practical ways of addressing the needs of the players.”

Mr Awuah added that “once a bank is able to understand them, you will be able to help them to realise their potential and share in their glory”.

SME sector

The SME sector in the country is considered a sleeping lion. The sector holds enormous potential. For instance, research has shown that more than 70 per cent of companies in the country are small or medium-sized enterprises. The sector is also the largest employer as compared to the public sector.

In spite of its potential, the sector lacks the needed funds to be able to maximise its full potential by absorbing the large unemployed in the country while contributing to the country’s revenue generation stream through the payment of taxes.

Financial institutions, particularly banks, have continuously shied away from supporting the SME sector because they describe that area as risky.

In the last couple of years, sources within the banking sector say that the large Non-Performing Loans (NPLs) on the books of banks is from the SME sector. The correction within the economy which created a slowdown in business activity badly affected the businesses of players in the SME sector, hence their inability to service the loans granted them to turn around their businesses.      

With banks arguing that the funds released to the sector are from depositors and, therefore, risking it by releasing loans to players in the sector only for it to be locked up for varied reasons is problematic and unattractive.

However, Mr Awuah said after a long study of the needs of the SME sector, UMB was poised to do what it takes from its research to support and revive the ailing sector.