Scotia Bank is seeking to work more purposefully with local small business aspirants to ensure they are eligible to borrow.
Carmichael Street Branch Manager Matthew Langevine and Products and marketing Manager Jenifer Cipriani told Stabroek Business during an interview last Friday that Scotia is pleased with the response of prospective borrowers to its efforts to enhance eligibility for small business loans.
Scotia Bank formally launched its Small Business Banking Services on February 15 this year but Langevine told Stabroek Business that access to loans from the bank for small business pursuits long predated the official roll out of the plan. “While the roll out of the plan has meant that more people are now formally aware that we offer small business banking services, we had been working with people in the small business sector long prior to that,” Langevine said.
Local commercial banks have faced criticism in some quarters over claims that their lending services are not geared to meet the requirements of persons interested in securing loans for modest entrepreneurial pursuits. However, Cipriani said that commercial banks’ lending decisions had to be linked to assessments of the borrowers’ ability to repay their loans. “The requirements that banks put in place are designed to help us to ensure that we can properly manage the risks associated with lending. Obviously, we need some measure of guarantee that the loan will be repaid. That is the policy of all commercial banks,” Cipriani added.
According to Langevine, the risks associated with small business lending necessitate the creation of support systems that are managed efficiently and effectively. “That is why we have trained our staff to make them sufficiently competent to advise small business borrowers and that is why we have partnered with specialist organizations that can help borrowers meet lending criteria. Issues like record-keeping and simple accounting are important to the process,” Langevine added.
Cipriani told Stabroek Business that on the whole there is evidence that local commercial banks have been “embracing more and more” potential small business borrowers and trying to render them eligible for borrowing. “That, actually, is one of Scotia Bank’s philosophies.
We encourage people who are seeking to access loans to come in and talk with us.”
Cipriani said that as part of an initiative to “work with small businesses” Scotia had engaged the Volunteer Youth Corps (VYC) in a bank-funded project aimed at setting up a Business Development Centre to provide small business owners with the technical assistance to help them meet the lending requirements set by the bank. “What we found, however, was that the VYC has some issues in terms of the human resources necessary for the creation of a Business Development Centre,” Cipriani said.
Meanwhile, according to Langevine, Scotia has been working with local institutions with small business interests, including Empretec, in an effort to reach prospective clients who have already established small businesses or who are seeking to do so and are desirous of enhancing their eligibility for small business lending. “We have had a long-standing relationship with Empretec that allows for the bank to participate in their seminars. Very recently, we did a presentation at one of Empretec’s group meetings in which we shared with them information on how to start a business and how to run a business. Scotia’s relationship with Empretec is quite solid and we have given them a commitment that we will continue to work with them and to provide advice on how we can help them.”
Criteria
Scotia Bank has set specific criteria for persons applying to the bank for small business credit facilities which criteria include income statements and balance sheets for at least three years; breakdowns of balance sheets such as receivables and stocks for stated periods; explanations on fluctuations in accounts, year over years such as sales, payables etc; details of present and previous bank borrowings and details of assets.
Langevine said part of the challenge which small business loan applicants have faced in meeting eligibility criteria has been that their management practices have often not taken account of the need to prepare and manage such information. “Simple accounting is vital. Some small business operators tend not to cater for their expenses. Sometimes they see money coming in but they may not think about what they are expending. They need to be able to recognise that variance between what represents and what they are actually making because you could be running a business for years and not make any money without recognizing this,” Langevine said.
Cipriani said Scotia was interested in helping small business operators to understand these basic business principles in order to help them arrive at a position where they can satisfy criteria for small business lending.
Meanwhile, according to Langevine, Scotia’s small business product launch is part of its international recognition that small business is an important sector which we must support. “Our core purpose is to ensure that all of our customers become financially better off by providing relevant solutions to their financial needs. In this regard our policy is that our small business customers cannot be left out. We have developed a specific suite of products and services that will help to meet the needs of the small business sector,” Langevine said.
Scotia’s suite of small business services launched in February includes chequing and savings accounts which, the bank’s promotional brochure says, facilitate both easy record-keeping and easy access to cash reserves; revolving credit options which include overdraft protection and credit lines for business; credit cards and term loans for businesses. The bank’s cash management and merchant services allows for account management and updating of books through online information retrieval.
Training
Langevine said the bank’s small business programme also includes the training of staff at the level of assistant managers to develop the competence to be small business advisers to small business people specifically. “We have three assistant managers in our Carmichael Street branch and one at every other branch who are there to respond to enquiries and to satisfy the needs of the small business sector,” he added.
Criticisms of commercial banks’ lending policies have also centred around claims that micro enterprise borrowers are frequently excluded even from existing small business lending arrangements available in the banking sector. However, Langevine told Stabroek Business that while there may be limits to the extent to which the bank may be able to respond to some lending requests, “our policy is to exclude no one from the services that we have to offer. Whatever the nature of the request, there is a great deal of advice that we can still provide. Everyone has a unique need and Scotia is prepared to help provide a solution to that need.”
He said, that whatever the nature or size of the business “the individual will need a bank account and a savings plan that helps them to retain resources and accumulate more capital so that they can expand their business. We can provide those services.
Our role is not only to provide the banking services but we can also serve as advisers to persons who, for example, may need technical advice on investment in agriculture. We are not agriculturalists but we may be able to lead them in a direction where they can get that professional support. Our support, therefore, is available to persons at every level.”
Langevine said that on the lending side micro-lending is “a separate kind of business.” He explained that Scotia was one of the first commercial banks in Guyana to establish a micro-lending institution, Scotia Enterprise. He explained that the bank subsequently sold that portfolio to the mirco business lending institution DFSLA Inc, “Because those customers still remain as Scotia Bank customers, and because we continued to have an interest in their welfare, we continued to pay a trusteeship role within the DFLSA, Langevine said. Langevine explained that the current arrangement works well for both the bank and for micro business borrowers. “Many times the needs of such borrowers are in the region of $100,000 and our lending structure does not necessarily allow for those kinds of very small financial arrangements. Our small business lending portfolio may generally start at around $1 million. Depending on the circumstances we have done smaller loans but, generally, it does not fall below $500,000. The bank, nonetheless, may sometimes seek to facilitate such micro borrowers under its personal loans sector, Langevine added.
And despite the fact that Scotia’s small business lending regime does not usually allow for what Langevine describes as “very small financial arrangements” he told Stabroek Business that the bank still retains a reputation for facilitating modest borrowing needs. “We were known as the bank that gave unsecured loans and we still have a very large unsecured loan portfolio under our retail loan programme. We also do unsecured loans in small business. Unsecured loans are nothing new to Scotia Bank,” Langevine added.
