Finance, Forex and Investments

Outline the contribution of commercial banks in developing small and medium enterprises?

The government of Tanzania has decided to develop small and medium enterprises, Commercial banks are one of the major pillars in engineering this endeavor. What should be done for the commercial banks to develop small and medium enterprises?

Public Comments

1. At the macro level, good bank regulation is important so that the financial markets develops properly. At the institutional level, you can (a) provide banks with credit lines specifically targeting small businesses; and (b) conduct a bank diagnostic and design an advisory program that tackles weaknesses in a given bank. In both cases it is important to monitor key indicators, such as the size of the bank's SME portfolio, which should grow over time, as well as as processing time, average loan size, default rate, and so forth. You should also look at leasing, which is excellent for small businesses because the asset acts as collateral. This avoids the high collateral requirements often found in developing countries. A link to a Tanzania leasing project is below, as are other relevant links.