A few years ago FUIB specialized in providing services to large businesses. However recently the bank made a real breakthrough in working with small and medium businesses (SMB) and deservedly became the winner in the nomination "Support for the SMB" of BUSINESS financial rating. Olexiy Volchkov, FUIB's Deputy Chairman of the Board told about the specifics of work in this segment on concrete examples.
- How do you assess the prospects for the development of small and medium sized businesses in Ukraine?
- According to statistics, now in Ukraine the share of small and medium sized businesses in GDP equals 10-15%, whereas in more developed countries, starting with the Eastern Europe, this figure ranges from 50 to 60%. Ukraine will anyway be developing in a similar way. I am closely watching Poland. In the early 90s, the structure of its economy was very similar to Ukraine – large businesses dominated. Some banks then made a strategic decision not to work with small companies, since their share was negligible. They argued this in the following way: we will wait until this market grows, then we will see. At the same time, number of banks acted differently and got their money's worth. Such an example is a "daughter" of the German Commerzbank – BRE Bank, which became the leader in this segment. The opposite example is the Polish “daughter” of Credit Agricole, which did not see prospects in the SMB. When about 5 years ago they decided to enter this market, they realized that it is already divided. Speaking about FUIB, about 4 years ago the goal was set to actively develop this segment, because we believe that it will play a significant role in the future, and our bank strives to occupy the leading positions in it
- Often speaking about the criteria of attributing a client to the SMB, one talks about an upper limit, for example, annual turnover. Do you have a lower limit?
- No, we are ready to work with arbitrarily small legal entities and/or private entrepreneurs. At the same time, we have the smallest possible loan amount, below which it is not economically profitable to organize the transaction. This "loan minimum" amounts to about 1 million UAH. That is, we do not deal with so-called micro-lending. Another point is important here. When we did the analysis of the development of the SMB segment in the world, we saw that lending brings banks not more than 30% of the income from the cooperation with the SMB customers. Everything else is income from commissions and liabilities, that is, account balances, deposits. Typically, SMB is a segment for banks, where resources are formed, as opposed to large businesses. That is why we are actively working with the micro segment – we do not lend, but we provide services very well. In order to carry out operations, they need convenience and speed. Competition between banks occurs mainly in the service model, backed by a team and technology. In contrast to the products, it is virtually impossible to copy bank service model.
- Is organization of work with SMB in your bank closer to "corporate" or retail?
- In our bank SMB is divided into 3 segments: micro business with annual turnover of up to 8 million UAH; from 8 to 40 million UAH is small business. Everything above and up to 400 million UAH is medium sized business. In terms of technology of service provision, medium sized business is, of course, closer to large corporate business. The only difference is a regional binding of the segment. You will not succeed in qualitatively providing services from Kyiv for a client in Lviv; you need a strong local manager, respected in the region. Approaches to work with micro business are similar to retail.
- Give an example of a specific SMB client.
- The bank cannot give names of companies without their consent... Let's take agriculture. We work with farmers, who cultivate from one thousand hectares of land. Here we have a client who cultivates 25 thousand hectares in the Kharkiv and Poltava regions. It is, roughly speaking, a few villages located close to each other. Here he gets into his Toyota Land Cruiser and every day goes round his lands, driving about 250 km. He employs about 700-800 employees. He has a diverse business – he deals with gardens, crop farming, livestock farming, he has own small processing plants, and sells his products in local shops. In his district of several villages he is, roughly speaking, the king and the God.
- How did you attract him for the provision of services? Did you lure him away from someone?
- We are constantly working with databases. When the economy is not growing, there is nothing left to do but to compete for clients with other banks. Yes, we did, we did lure him away. We do this regularly, as other banks also do... In this case, it was about a competitor bank from the top ten.
- Why did he join you? What was the decisive factor?
- There are a lot of factors. Yes, we gave a loan under good terms, but without dumping. We have a fairly tight lending policy. Head of the regional center of the bank and his deputy were involved in attracting this client. Usually at this particular level the first meetings of such kind take place. Further, managers are engaged in the provision of services.
- And how did you get acquainted with this client?
- Well, given that it is quite an interesting client in this segment, I gladly went to him to look at his farm. Besides, I have a desire to look at businesses, for which we provide services, not only from the office, but at its location. It is difficult to understand the customer's wishes without talking to people personally and only by getting information through third parties.
- Does this customer have ambitions of growth? For example, to the level of a large agricultural holding?
- There is a prospect of growth always and everywhere. If you take Poland, 20 years ago SMB had the same solidity as Ukraine has today – the annual turnover of up to 50 million Euro. 3-4 years ago, this threshold has already amounted to 350 million Euro. That is, the Polish banking system has just raised the bar. Gradation is born depending on how the business owner seeks the bank for the provision of services. Medium-sized companies are looking for banks that are strong in their region. First questions asked by the owners are: Who else in our region you are working with? what local businessmen can recommend you? If the head of the bank in this region does not have authority with the local business elite, then he has little chances. The head of the branch and his deputy are far more important for SMB than the Chairman of the Board.
- Let us go back to the client. Is he an exporter?
- Typically, he sells the crop abroad, not directly, but through grain traders. I must say that even if an agrarian is not formally an exporter, the price of his products is still one way or another pegged to currency, that is, there is a certain "hedge". At the same time, for example, in the current year agrarians faced with the following problem. They had to purchase chemicals after the devaluation, 9 months earlier than the crop sale. A gap in working capital occurred.
- Did the bank help?
- Of course, we helped, according to how much money there was... However, this particular company had to invite one more investor into the business.
- What products do you sell to this businessman?
- They receive full complex services in our bank – from cash settlement services and salary project to loans and documentary operations. Business owner, who travels extensively, including business trips for exchange of experience, has our prestigious card Visa Infinite. In addition, he keeps his deposit in our bank, as an individual.
- As I understand, agrarians form the basis of SMB segment in your bank. What is there besides village?
- Yes, the agricultural sector accounts for 30-40%. Its domination is associated with higher transparency in comparison with other industries, for example, with trade, which is related to cash flow. The fact is that small agricultural producers had certain tax benefits that encouraged them to show the lion's share of real finances in the official statements.
In addition, in recent years FUIB has greatly developed factoring for SMB from scratch, through which it provides around 30% of total funding to this segment. We work with large debtors in various industries (from trade networks in retail to large industrial enterprises, for example, in mechanical engineering), but with stable financial situation.
- How do you classify clients by the intensity of cooperation with the bank?
- There are three groups. The first one consists of clients who have a current account opened in our bank. The second group includes active clients who make not less than 5 transactions of any kind through the bank every month. And the third group includes customers who bring income. This is what we strive for. We set the level of expected income from each such client. Our goal is to increase the share of active and profitable clients in the total client base. Even if the client stops making some operation, there is a whole program of his reactivation.
Source: BUSINESS from 08 June, 2015
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