Banker highlights issues faced by SMEs

Caption: BSP Deputy CEO Johnson Kalo

By MATTHEW VARI

Sunday, October 12, 2014 (Sunday Chronicle, PNG)

BANK South Pacific Deputy Chief Executive Johnson Kalo highlighted the issues associated with many of the problems businesses within the SME (Small to Medium Enterprise) sector in the country are facing as observed through its is SME clients.

His comments were made to advise newly graduated youth ICT (Information and Communications Technology) entrepreneurs under the Australian Business Volunteers YES (Youth Enterprise Scheme) mentorship course concluded on Monday.

Mr Kalo emphasized how vital it was, and an issue also, at not only starting a business but how to manage and maintain its growth in the country under the SME category.

“Firstly I want to say that I am happy that Papua New Guineans are improving their capabilities, and the bank always encourages within its own staff and broadly outside in the general economy,” he said.

“The SME sector includes startups and small businesses and at the bank we do have a working definition of SMEs and that is that it is for businesses that generates less than K3 million in revenues per year.”

“That definition is not universal, I know different people of different countries have different definitions- that is the one we use and that is the one the Department of Commerce (Department of Trade Commerce and Industry) uses.”

Kalo revealed that BSP’s customer portfolio consists of about 12,000 SMEs, with just under 700 loans to SMEs valued at K35 million, attributing SME sector as growing slowly as an active segment in the bank.

“Some of the issues faced by our SMEs include a lack of knowledge in financial planning- financial records are very limited, and as a consequence of that a lot of the businesses are cash oriented.” Kalo pointed out.

“In order to get by that we want to make sure that you recognize that basic book keeping is an important part of any organization not only in businesses but in our homes as well.”

He encouraged SMEs to advantage of the electronic banking systems that are in place and also disciplined themselves to obtain confidence from banks to invest capital.

“One of the other challenges SMEs face is that they struggle to separate personal finances from business finances, I don’t think it is just SMEs but it is all of us.”

“Finding that balance between personal and private is important- have a bank account for your business and have one for yourself.”

He highlighted succession planning as another vital aspect to ensure the businesses built outlasts its founder and not die with them.

“Clients tend not to deal with the business but with the person- that culture is prevalent and it is difficult to get away from that, so as your business starts to grow you will need to start thinking about growing an independent business.”

“What we would like to see in SMEs is genuine commitment, which is what banks like to see.”

He pointed out that with the increased interest by the government is playing in developing the economy; it is important small business owners understanding what they are doing in terms of the various economic policies.

“Never ever forget that the community is a strong value- always keep in mind that whatever you do, and whatever your business has to do must have a positive impact on the community.”

“There are things that we can all do privately or through our businesses. The community will repay you immeasurably over the years,” he concluded.