To ensure the creation of a large number of SMEs, the state should play a major role. Khalil Ammar, CEO of the Bank for Financing Small and Medium Enterprises (BFPME), calls on the government to entrust the management of public funds to that bank so that it can support entrepreneurs in setting up their own projects. According to him, the Government, in most liberal economies and in order to promote the creation of projects, gives structures dedicated to SMEs all means to meet this challenge. Interview:
Can you present an overview of BFPME’s activities in the previous year?
At the level of approvals, the year 2012 was marked by a 3% increase compared with the previous year, the equivalent of 82.1 million dinars. Similarly, there has been a 26% rise in commitments to reach 55.6 million dinars in 2012, and 204 million dinars since the bank was created in 2005.
Also, 2012 saw an 18% increase in loan disbursements, or 45 million dinars during that year. This has enabled to achieve a total volume of disbursements of around 169 million dinars, since 2005.
Why this difference between the amount of commitments and disbursements?
The majority of the projects we fund, 83% of which are creative projects while 17% are extensions.
Can you tell us more about the types of projects?
We finance all sectors except real estate for housing.
At the level of sectoral distribution, 66% of funded projects belong to the industrial sector, i.e. 75% of the bank’s portfolio. Nearly 20% of the projects concern the services sector with a volume of approval of 50 million dinars and 7.6% of the projects belong to the sector of information and communication technology and the renewable energy sector.
Regarding regional distribution, two-thirds of the funded projects are located in areas of regional development. More than 45% of the projects are approved by the bank for a budget of about 165 million dinars. All these projects have led to the creation of 16,000 job positions, i.e. 22 job positions per project.
In any case, we can say that the activity of the bank is still growing despite the particularly difficult situation facing the country.
While figures are encouraging, the BFMPE faces several shortcomings. Can you talk about that?
Firstly, we are not receiving enough good projects-promoters couples. In terms of figures, the bank should be able to receive more project-promoters couples. This implies a great effort to spread upstream entrepreneurial culture in Tunisia, develop the spin-off program in order to identify potential and interesting promoters and promote activities of support structures (business centers, business incubators etc.).
The second problem concerns the financing of SME creation. We realize we do not have the tools to meet the financing needs of different promoters.
Today, the bank is a single product, that is to say, it has a medium and long term credit where as there are needs at the level of the capital and in working capital which are important for the start of SMEs. In addition, there are products for funding operation cycles. However, the bank does not have adequate financial products to meet the needs and expectations of promoters.
The third constraint is related to the quality of advice and guidance. Promoters of SMEs need more than other companies support at all levels, from credit commitment to project realization and even in monitoring operations. To date, we have not yet reached the level of advice and support that we consider necessary for these SMEs.
So, we can say that much remains to be done to improve the quality of services.
What should be done to fill these gaps?
To address these problems, the bank’s strategy is clear with only one goal to improve the quality of services for SME promoters, that is to say, promote the quality of our advice and thus improve the quality of our products by providing financial products to be able to meet their needs.
To enhance our ability to provide advice and assistance, we have focused on decentralization. The point is to strengthen our regional representations, since developers’ need is a need for closeness. The closer you are to your customers, the more you understand these challenges and help overcome these constraints.
In fact, the bank is present in 20 governorates and our goal is to increase enrollment. Today, the number of staff accounts for ¼ in regions. Our goal is to raise it from 25% to 50%, i.e. 50% in regions and 50% in the head office, with a goal of having two-thirds of the workforce in regions and only one-third at the seat by two years.
The second axis is that we are trying to increase the capacity of our staff to provide the necessary services.
In terms of product diversification, we have adopted a number of new development contracts, to strengthen equities of projects we fund. Other products will also be developed such as leasing, factoring and insurance products.
We are working with the authorities for the management of public funds like FOPRODI and FOSDAP which are intended to strengthen the equity of SMEs.
First reduce the number of interlocutors. Instead of having two stakeholders (BFPME and API), the idea is to have a single source. Also, our interest is to reduce the time for closure of funding. But it remains dependent on the consent of the State.
The objective is to reduce delays. Today, blocking a funding scheme of an SME, between SICARs, public funds and bank loans, requires 6 months. The objective will be to reduce the time from six months to one and a half months.
If the State entrusts us with the management of public funds, the time will be reduced with the existence of single vis-à-vis and only one institution, so it would be able to get its public funds and its medium and long term credit.
Actions are certainly promising, but they do not meet the aspirations of young people, who are already disappointed and ask for concrete things that could help them to work. What do you think is the major problem?
The problems come from multiple levels. Today, the system of entrepreneurship, despite the effort provided, is still insufficient and inefficient.
Indeed, the creation of new businesses and projects is an activity that is not much profitable for private banks.Why? Because you act diligently to convince a promoter. You will spend a lot of time with him to understand what he wants. You will investigate a case and then give a credit which has not a great value, but with a very high risk, since it is a new creation in a competitive environment.
A fledgling business is more fragile than other already present for years. Also, we note that the promoter may be driven by a good will, but he has not enough experience.
What should be done to make SME financing interesting?
The State shall, within that framework, deploy great effort at both assistance and support levels. This is the reason why the state should invest heavily in assistance and support structures.
More importance should also be granted to business centers, business incubators and especially human skills that will be responsible for mentoring young entrepreneurs. This will help those with ideas to realize their business plan to be well informed and well structured.
Therefore, the promoter is more likely to obtain funding in a timely manner.
And what about proposals?
One of the tools of initiative is to disseminate the national spin-off program.
I take this opportunity to recall that many companies, particularly in the banking sector have not adhered to this pilot program.
We can also reform the entrepreneurship leave, considered heavy.
We must put in place a system that would support promoters by increasing the chance of success of SMEs.
At the level of the BFPME, the bank is required to provide and manage public funds for SMEs by enhancing the levels of guarantee.
What would be the role of the state in this process?
Entrust the management of public funds BFPME and promote understanding between the Tunisian Guarantee Company and BFPME. We must move to a dynamic guarantee. For some requirements, we must move to guarantee levels that exceed 70% depending on the profile and activity of the promoter. We must give more guarantees for new promoters.
The BFPME should also be given specific funds so that it can increase the level of guarantee of financing for new developers, who are naturally more risky.