Marketing: The Crucial Success Factor for Pakistan's Credit Guarantee Scheme
Nadeem, Talha; Rasool, Raheel | December 2018
Abstract
Despite their significant contribution to GDP and employment, SMEs face constraints in accessing finance in Pakistan. To motivate banks to lend to SMEs, the State Bank of Pakistan introduced a “Credit Guarantee Scheme for Small and Rural Enterprises” in 2010. However, the response to the scheme was initially somewhat muted, which may arguably have been due to factors like the design of the offer, its governance structure, or the reluctance of financial institutions to engage with SMEs in general and the credit guarantee scheme in particular—or a combination thereof. Nevertheless, in this paper, we confine our focus to a discussion of how inadequate marketing diluted the scheme’s impact. Specifically, several commercial banks could not tailor elements of their marketing mix—including people, products, processes, and promotions—to take full advantage of the scheme. That said, periodic revisions of the scheme helped to address some of its shortcomings, while the expectation is that other indicators will improve due to the recent changes in the scheme’s parameters. The key finding is that policy makers can maximize the impact of a credit guarantee scheme by paying attention to the marketing mix, which sets up participating financial institutions for success (or failure) during the implementation phase. In addition, the scheme’s structure should be a long-term intervention and its intended duration should be clear at the outset so that the participating financial institutions are motivated to design and roll out specialized products that tap the full potential of credit guarantees. Furthermore, the scheme’s originators should be prepared to develop the entire ecosystem, which may include some initial hand holding of SMEs.
Citation
Nadeem, Talha; Rasool, Raheel. 2018. Marketing: The Crucial Success Factor for Pakistan's Credit Guarantee Scheme. © Asian Development Bank Institute. http://hdl.handle.net/11540/9481.Keywords
Development
Finance
Development Challenges
Development Issues
Development Problems
Microenterprises Finance
Commercial Finance Companies
Enterprise Financing
Financial Analysis
Banking Finance And Investment
SMEs
Small Business Finance
ADB
Project finance
Development plans
Strategic planning
Business Financing
Investment Requirements
Insurance Companies
International Monetary Relations
International Financial Market
Exchange Rate
Insurers
Insurance stocks
Insurance holding companies
Insurance carriers
Insurance agencies
Business subsidies
Investment companies
Foreign investment
Equity Finance
International banks and banking
Stock exchanges
Grants
Loans
Communication in rural development
Communication in community development
Economic development projects
Development banks
Economic forecasting
Environmental auditing
Cumulative effects assessment
Human rights and globalization
Small business
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