Saturday, January 12, 2013

Beneficial CSR activities


Hey all,

During Christmas, corporate organizations were competing for media space on their CSR (Corporate Social Responsibility) activities, it occurred to me that these organizations should be more strategic about their CSR activities. This week, I consider how financial institutions can meaningfully give back to society (other ideas and contributions are welcome)

I am a firm believer that the Small and Middle-scale Enterprises (SMEs) would drive our growth. Why? SMEs engage in production (tangible and services) and more production would have multiplier effects on any economic system. For example, a baker buys eggs from a farmer who buys feed from other farmers.
Yet IFC (International Finance Corporation) reports that Financial Institutions (FIs) under serve SMEs which are the pillars of any economy.  

High interest rates (about 22%) are a strong limitation for SMEs to procure loans especially in Nigeria’s harsh economic climate. Apart from high interest rates and limited access to finance, SMEs face challenges such as weak infrastructure, insecurity and poor internal systems.

In addition to their CSR activities, FIs can organize free training programs for their SME customers. A credit worthy, better structured SME is an asset to any bank. One advantage of having structured SMEs is that loan defaults would be reduced, and SMEs would become more credit- worthy thus removing the barrier of limited access to finance. SMEs lack the administrative know-how to run their businesses, ensure consistent profits, differentiate profits- profits for the company and owner profits and imbibe those little details that can make or mar a business (quality service and products).

Programmes that can educate their clients on how to run a business- efficient record and book keeping-, plan growth, create an enduring business structure, and accessing finance should lead to positive changes in small businesses thereby making them more profitable and creditworthy. This would result in positive outcomes for the SMEs (profits, expansion), FIs (a well-served customer would refer others=more business for the bank, new products would be developed for SMEs) and the society (the government gets more revenue, citizens get better products and services, SMEs patronize other businesses). This may seem plain and rudimentary but it is an option worth exploring.

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