1. SMEs @ Bank Alfalah limited
Rethinking SMEs – To Do Things Differently

2. A Story – From Vision to Delivery
“Banks should have top most priority to SME banking with a view to ensuring uninterrupted flow of financial access to SME sector in the country” Atif Bajwa, 2012
“We have been working in conjunction with IFC to introduce Non-Financial Advisory Services to SMEs in Pakistan, which will add significant value to them in managing their businesses. By providing SMEs with access to vital managerial tools and global learning resources, we are optimistic that the SME Toolkit will help empower the local entrepreneurial community and hence enable economic progress.” Atif Bajwa, 2014
"We are glad to have partnered with the country's largest tractor manufacturer Millat Tractors and are very confident that our packaged banking solutions will significantly help them meet the exceeding demands of their ever-growing customer base and business.“ Atif Bajwa, 2016

3. Strategic Intent and Ideology
Bank Alfalah recognizes the key role SME’s play in Pakistan’s Economy and has developed a Long Term Strategy to target the SME segment as a major business opportunity.
In its continuous commitment to provide sustainable solutions, Bank Alfalah has initiated various Financial and Non-Financial Programs to improve Financial Inclusion for SMEs.
Why at Bank Alfalah SMEs hold such great value?
Contribution of SMEs
Economic Growth
Incubator for development of Local Corporate entities
Huge Market potential and opportunity
Creating a value proposition that creates a win-win situation for both SMEs and Bank Alfalah Limited

4. Business Segmentation and Potential
Corporate/ Commercial Enterprises
Medium Enterprises
Small Enterprises
Agri
Micro
Corporate / Commercial Enterprises
Medium Enterprises
Small Enterprises
Agri
Micro
The Volume Pyramid
Vs.
The Value Pyramid

5. Over 3 Million SMEs in Pakistan
Contribution to the Economy
Only 6% are banked
Over 3 Million SMEs in Pakistan
Contributes 30% towards GDP
Employs 75% - 80% of non-agricultural workforce
Employs almost 45% of total workforce
Contributes 25% of export earnings
But ..
Only 8 – 9% of the total private sector lending is deployed in SME Sector

6. Why SMEs are Discouraged?
Demand Constraints
Supply Constraints
Borrowers hesitant to borrow from banks, preferring equity financing from other sources (acquaintances, private investors) instead of debt financing
Smaller size of operations and irregular cashflows result in a reluctance to risk collateral with Banks
Limited management capability and multiple book keeping results in an inability to borrow through Banks
Infrastructural constraints like power, labor, technology and law & order situation inhibit access to finance
High NPLs in the sector (31.8% of the borrowers) has resulted in a flight to quality for Banks which has saturated the large corporate segment
Banks following a 100% secured lending model to minimize risk. Many businesses are unable to offer the required collateral
High search costs for Banks in terms of information acquisition and lack of credible data on market potential and opportunities
A high percentage of Banks do not offer a differentiated customer value proposition with tailored SME Transactional, asset and liability products
Bank Alfalah is focused at providing financial solutions to assist SMEs during the incubation period; focusing on complete financial and non-financial needs of the company
Successful and Established Commercial Entity
Incubator
5-7 Years OR
Since inception of any SME it faces daunting challenges
Failed Business Propositions
*Source: IFC Analytics, SBP

7. SME Banking Transformation
Year 2012
Year 2014 onwards
From SME Lending to SME Banking
Transactional Accounts; current and saving
Conventional Lending Solutions
Business Model Revamp
Value Chain Financing
Almost 11,000 customers with Lending Relationship
Almost 280,000 of BAFL customers, and the potential market
Business Advisory Manager
Trade solutions with focus on existing advances customers
Payroll and Cash Management Solutions
Conventional and product based Lending Solutions

8. Business Cycle and Misperceptions …
Digital Banking & Transactional Needs
Financial Needs
Payroll and Cash Management Needs
Wealth Management, Investment and Financial Advisory Needs
Liabilities
Transactional Flow
Advances
Cross Sell
Not always a starting point for New Relationships
SME Banking Transformation

9. SME Active Work Streams
SME Product Suite to be Enhanced
Integrating the Value Chain Verticals
Sector Based products and Services
Cash-flow based unique Product Propositions
Relationship Based Model
Branch Led Sales Model
RM Productivity Model
360 Degree Agenda
Non Financial Advisory Services
SME Tool Kit
Business Advisory Managers
Seminars and Workshop
Credit Approval Process
Delegated Credit Approval Structure
Streamlined Policy and Process Manuals
Collection and Recovery
Human Capital
SME Certification
BAM Certification
Staff Engagement and Performance Matrix
Business Analytics and Monitoring
Business Dashboard
SME Business Monitoring Pack
Automation of reporting 1 2 3 4 5 6

10. Key Constraints addresses Non-Financial Advisory Services
Alfalah Turning the Wheel for SMEs…
Ideology
Initiatives
Key Constraints addresses
Business Model
From SME Lending to SME Banking
360 Degree Approach for SME Banking
Branch led SME Sales Model
RM Productivity Model
Reduce cost of Search
Increase Target Market
Unique Customer Value Proposition by catering to complete Need Matrix of SMEs
Relationship and Need Based Solution oriented approach
Product Ideology
Integrating the value chain verticals
Sector based products addressing the needs of niches
Cash flow based SME Financing products
Address Collateral Constraints
Reduce Financing Risk Through Value Chain Financing
Reduce NPL through Niche Identification
Non-Financial Advisory Services
SME Toolkit, an online portal, to provide business tools to enhance business efficiency.
Business orientation and knowledge sharing sessions
Business Advisory Managers
Enhance Management Capability
Improve Documentation and Book Keeping Methodologies
Improving efficiency and output
Managing Infrastructural Constraints

11. Integrating The Value Chain Verticals
Current Account
Transactional Account
Digital Payment Solution
Lending Solution
Integrating The Value Chain Verticals
Industry Prospecting and Need Analysis
Identify Industries with strong Value Chain Verticals
Identifying Key Anchors
Understand the relationship and Transactional Flow of these Anchors with their Value Chain Agents
Cross Sell Products to Anchors
Deepen anchor relationship
Understand the Wallet Size and Transactional Needs of Anchors and provide appropriate products and services to fulfill these needs
Value Chain Conversions
Evaluate the Needs of Products and Services for Specific Value Chain Agents
Increase Financial Coverage for NON BAFL Value Chain Agents and increase Product Per Customer
Complete financial and non-financial solutions for all the agents in the value chain through leveraging the anchor relationship.

12. US AID Credit Guarantee Scheme SBP Credit Guarantee Scheme
Product Ideology
Financial Inclusions
Unsecured Financing
Value Chain Financing
Long Term Financing
Segment Niche
Alfalah has the largest suite of SME products covering wide range of working capital, long term and cash flow based lending products
Supplemented by:
US AID Credit Guarantee Scheme
SBP Credit Guarantee Scheme

13. Non Financial Advisory Services
Global Best Practice:
According to a survey conducted to understand Financial Advisory for SMEs in Developed Markets in 2001 it was revealed that almost:
95% of SMEs use External Advisory services
Accountants – 83%
Banks - 62%
Solicitors – 56%
Customers – 47%
Suppliers – 36%
Consultants – 32%
In Pakistan most SMEs are deprived of any form of formal advisory services specially from Banks and keeping this in mind Bank Alfalah has taken a step towards providing formal Business Advisory Services through its SME Banking Platform. 13

14. NFAS at Bank Alfalah OBJECTIVES STRATEGY EXPECTATION
Key impediment for SMEs is lack of management capability due to knowledge/skill gap
In its continuous commitment to provide sustainable solutions, Bank Alfalah has initialed its Non Financial Advisory Program to provide businesses with key management tools and solutions
Differentiate the Bank from competition by offering NFAS
Reinforce Bank Alfalah’s brand awareness, by becoming the “Advisor of Choice” to SMEs
Outreach towards Non/Under-banked segment
OBJECTIVES
Information
Knowledge Sharing Events
Advisory (Business Advice Managers)
STRATEGY
Access to Finance / Financial Inclusion
Improve business practices
Support business growth
Increasing SMEs ability to secure/ repay loans
EXPECTATION 14

15. www.pakistan.smetoolkit.org The SME Toolkit Product Overview
Web and mobile platform
Offers the latest information and communication technologies to help small businesses in emerging markets to:
Learn and implement sustainable business management practices
Increase their productivity, efficiency and capacity
Gain access to finance and new markets.
Help them in term of business guidance, market review and industry analysis

16. The SME Toolkit
Visits on the SME Toolkit since start- Over 200,000
Local Content Development:
Regular update of the Toolkit with articles on the economy, different industries and sectors.
Daily RSS Feed taken from Business Recorder.
Articles on local trade flows uploaded.
Video Tutorials:
New category with 12 e-learning videos added on the SME Toolkit.
Content Translation:
Urdu translation of 42 global content items sourced from SMEDA and uploaded on the SME Toolkit.
18 Languages
Award to Bank Alfalah on “Best Content Development” in IFCs 5th Annual Conference in Abu Dhabi
Over 20 Mil Users
43 Markets 16

17. Market Outreach Activities
More than 30 events in key commercial hubs of major cities
Conducted across all regions
4000+ operating SMEs tapped
Roadshows
12 Events conducted in major commerce chambers and trade bodies
Connected with 1,000+ business owners
Tax awareness sessions held
Alliance with SMEDA to set-up Help Desk.
SMEs Trained by Alan Miltz, Global Finance Coach .
Industry Events
Trainings at 5 different business institutions
Audience of 500+ students
Plans to hold sessions at LUMS, LSE, Punjab University
Educational Institutions
Collaboration with The Indus Entrepreneurs (TiE) and Enclude to provide financial training to entrepreneurs on ‘Access To Finance”
4 seminars conducted
350+ aspiring entrepreneurs touched
Entrepreneurial Bodies
Roadshows
Trade Associations
Entrepreneurial Bodies
Educational Institutions
Sahiwal
Faisalabad
Islamabad
Rawalpindi
Gujranwala
Karachi
Kamoke
Muridke
Lahore
Pattoki
Depalpur
Arifwala
Burewala
Chichawatni
Renal Khurd
Phool Nagar
Okara
Sargodha
Jhang
Sialkot
Pakpattan 17

18. Business Advice Manager (BAM) Program
Who are BAMs?
Business Advice Managers (BAMs) are trained business professionals who provide recommendations to SMEs after a systematic analysis of the SMEs’ business to improve business management practices and increase access to finance. 
BAM Program:
Bank Alfalah in collaboration with IFC’s brought in a trainer to train all its employees on SME Banking needs and the provision of advisory services.
These Trainings are a One Day Program and is included as part of each SME RM Level 2 training Program.
All BAMs will work closely with their existing SME Customers to assess the need of Business Advisory and provide necessary guidance and will evaluate the performance. 18

19. Thank You !!