Access to Finance Program

Small and Medium-Sized Enterprises (SMEs) are key players in the deployment of sustainable economies. Government-supported enterprise development and business-support programs currently exist in Jordan, although few address the critical financing gaps SMEs, business, and start-ups encounter with the financial institutions. That called for the need for financial support mechanisms for those enterprises experiencing capital constraints and difficulties in making it to sustainability.

BDC offers a solution that works concurrently with SMEs and financial institutions, on which it provides SMEs with tools and training with which to develop, implement and measure financial and operational strategies. It also provides financial institutions with tools and training for better risk assessment and management and introduces new lending methodologies appropriate for SMEs.

The proposed solution might not directly leverage public intervention, however, Jordan is moving towards assisting SMEs through venture capital funds. Many venture capital funds, loans, and other SME Finance opportunities will be available for SMEs through donors and governmental institutions. Therefore, this innovative solution will help leverage future public interventions for private SME finance through creating a platform of SMEs who are capable of handling their finances in a healthy and righteous way.

The solution will make sure that SMEs fully realize the challenges and growth barriers facing MSMEs which results to business failures and will learn how to approach financial institutions. It will also introduce participants to the financial statements; allow them to master critical financial components such as financial ratios, leverage analysis, and risk analysis in addition to the borrowers 3 Cs (Collateral, Capacity, and Credit Reputation). The participants will also experience a practical training on “Global Financial Bridge Software” to prepare uniform financial statements

It is expected at the end of the training, participants will be able to understand the main components of financial statements while adopting all the needed tools to enhance financial and ratio analysis as an effective tool for management decisions. Through the practical component of the program; participants will have the opportunity to apply financial data to the “Global Financial Bridge Software” and therefore prepare and present accurate financial report to potential lenders/investors and identify business failure and success factors

On the other hand; the program provides financial institutions with the 4 key value propositions enabling them to prospect for quality clients by engaging the potential customer through a common interactive communication platform, evaluate financial risk through the assessment of growth quality, profitability, working capital requirements and most importantly the businesses ability to generate quality cash flows.

In addition, it also assists participants in establishing a reliable credit scoring in standard format to lend profitably to good customers as well as perform ongoing loan management by measuring actual performance versus projected performance against agreed upon loan covenants

Small and medium enterprises (SMEs) are a major source of economic growth, exports, and jobs. In Jordan, SMEs that employ 5-100 workers account for 70% of all employment. However, unlike their counterparts in developed countries, one of the main impediments that SMEs encounter is access to capital and financial services to spur growth in an expanding and highly competitive market.

The most serious barrier to capital access for an otherwise viable and growing small enterprise sector, in Jordan, is that lending decisions are heavily geared toward valuing collateral, which ultimately stifles innovation, product diversification, and competition. Sources of finance are typically restricted to personal and family members' savings and internally generated business earnings. While Commercial banks tend to primarily serve large companies and have more difficulties when it comes to SME financing due to high fixed cost, lack of information about individual SMEs and the market, insufficient guarantees, difficulty to assess the credit risk through classical financial analysis.

Changes to correct these inadequacies are underway which should spur innovation and competition. Furthermore, new products are gradually entering the marketplace in spite of a less than perfect legal and regulatory environment. Opportunities are being created for SMEs; still, however, much work must be done.

Based on the above, the major problem for SMEs in developing countries is their inability to provide accurate, transparent, and readily understandable financial information. Compounding this problem is the fact that commercial banks in developing countries are innately conservative and risk averse in their lending practices, demanding excessive amounts of collateral for SME loans. The result is a failure to communicate. SMEs complain that banks are not open to them, and will only lend them if they provide tangible collateral. Bankers respond that without adequate financial reporting, they can not analyze or judge the prospects of an SME.