Country Review SME loans to total business loans has remained at about 30% between 2010 and 2014, though total loans have been increasing, and private sector credit is higher over the period. The licensing of the fourth bank in 2014 should be a positive development for SME financing through increased competition. Nonbank Sector According to the CBSI, the nonbank sector in Solomon Islands has many small participants, on the one hand, and one quite large participant on the other. This imbalance and the lack of a middle ground of nonbank participants causes the sector to be a long way behind the banks. To illustrate, there are 176 registered credit unions (though few are active), 276 registered savings clubs (as of 2010147), and finance companies (Credit Corporation and South Pacific Business Development) active in the nonbank sector. Some diversification has, however, occurred recently, as a new credit union, Tuna Trust Credit Union, was licensed in 2014. Of note is that many of the registered institutions not report their activity to the CBSI, so their data are not publically available. The South Pacific Business Development (SPBD) is the only nonbank financial institution (NBFI) that regards itself as a microfinance institution (MFI) in the country. The SPBD had a loan portfolio of SI$2.2 million in 2013 and SI$3.9 million as of September 2014, an increase of 77% in less than year. This reflected the large, existing demand for microcredit in the country. In terms of challenges, SPBD reports that underdeveloped infrastructure in several areas in Guadalcanal inhibits their ability to reach more clients, due to inaccessibility. was SI$117.3 million at the end of the third quarter of 2014, up from SI$104.6 million at the end of 2013 (Figure 4.233 and Table 4.114). Credit Corporation, the largest finance company, which had recorded sharp growth of its financing activities between 2009 and 2012 (from SI$25 million to SI$125 million) saw its loan portfolio decrease to SI$102 million in 2013, but then increase to SI$113 million as of September 2014. Overall, Credit Corporation made up 97% of finance company financing in the third quarter of 2014. By business sector, finance companies had 23% of their loans in the transportation sector, followed by the construction and wholesale and retail trade sectors, each with 19% of loans. This largely mirrors the sectorial data from the banking sector, where the top three sectors were the same, suggesting that both banks and nonbanks (primarily Credit Corporation) are financing the same types of enterprises (Figure 4.234). Credit Corporation recorded a positive financial performance in 2013, reporting an operating profit of SI$13.2 million, up by 9.4% compared to 2012, while total revenue was SI$18.6 million, up by 15.5% compared to 2012. The total value of new business written in 2013 was SI$70 million, compared to SI$52 million in 2012.149 Figure 4.233: Loans Outstanding— Finance Companies (SI$ mil.) 120 (Number) 100 80 60 It was announced in October 2014 that the Microfinance Pasifika Network (MFPN) will hold its next “Microfinance Week” in Honiara, in the second half of 2015.148 This suggests that Solomon Islands is seen as an emerging market for microfinance services, with strong potential for growth in the sector. 40 20 2013 Total financing Manufacturing Transportation Service No. of finance companies The CBSI reports that total finance company loans outstanding (combining the two finance companies) In Search of Sustainability: The Provision of Rural Financial Services in Solomon Islands, Mike McCaffrey, Central Bank of Solomon Islands. November, 2010 148 Central Bank of Solomon Islands, Press Release 17/2014 Solomon Islands 2014/Q3 Primary industry* Construction Wholesale & retail trade Others** * Agriculture, forestry, and fishery. ** Loans to businesses that are operating in sectors not included in the reported sectors. Source: Central Bank of Solomon Islands. 147 http://www.creditcorporation.com.pg/index.php/pacific/solomonislands/ 149 Asian Development Bank | Asia SME Finance Monitor 2014 289 Solomon Islands Country Review Figure 4.234: Loans by Sector—Finance Companies, 2014* Figure 4.235: Loans Outstanding—Credit Unions (SI$ mil.) Service 2.8% Others 15.0% Primary industry 14.6% 42 Manufacturing 6.3% 40 38 Trade 19.1% Construction 19.3% However, the credit union sector in the past years (2011–2014) has seen only a 10% increase, as the total portfolio was SI$37 million in 2011. This may indicate that the credit unions are not effectively expanding their customer bases. Analysis by the CBSI attributes the sector’s stagnation to poor governance, and sees a need for reform of how credit unions are structured, governed, and regulated. The Solomon Islands National Provident Fund (SINPF) is the largest supervised financing entity in the country, and accounted for 37% of financial assets of the financial system in 2013. It is the country’s pension fund, and total assets grew by 56% to SI$2.4 billion ($322  million) in 290 36.4 34.0 34 32 30 Note: “Primary industry” refers to agriculture, forestry, and fishery, while “Others” refers to loans to businesses that are operating in sectors not included in the reported sectors. * data as of September 2014. Source: Central Bank of Solomon Islands. The credit union sector stituted only about 1% of the overall financial system in 2013, based on the 10 credit unions (out of 176 that exist) that regularly submit reports to the CBSI. The consolidated balance sheet of the 10 credit unions increased to SI$50.6 million in 2013, from SI$49.7 million in 2012. This increase was driven by 6% growth in lending activities, which pushed up the total credit union loan portfolio from SI$34 million in 2012 to SI$36.4 million in 2013 and SI$40.6 million to September 2014 (Figure 4.235). 37.0 36 Transportation 22.9% Except for Credit Corporation, collateral registry and/or asset-based finance is not popular for financing SMEs among NBFIs in Solomon Islands. 40.6 2011 2012 2013 2014/Q3 Q = quarter. Source: Central Bank of Solomon Islands. 2013. This was attributed to the positive revaluation of the fund’s two portfolio companies; Solomon Telekom and South Pacific Oil. All employers in Solomon Islands are required to pay to the fund a sum equivalent to 12.5% of each employee’s total gross salary each calendar month. This payment contribution comprises 5% deducted from the employee’s monthly gross salary and 7.5% contributed by the employer on behalf of the employee/member.150 The SINPF submitted an investment proposal to the Ministry of Finance in October 2014, for approval to incorporate a new wholly owned investment subsidiary. Principally operating as a credit institution, the entity will provide mortgage and small loans to SINPF members as well as commercial loans. With ministerial approval, the SINPF will incorporate the company and appoint a board to run the company. The board will advertise for a chief executive officer (CEO) and appoint a suitably qualified person to draw up the subsidiary’s business plan, then apply to the CBSI for a credit license. It is anticipated that the new entity will secure its credit license by mid-2015. sinpf.org.sb 150 Asian Development Bank | Asia SME Finance Monitor 2014 Country Review Capital Markets There is no stock exchange or capital market financing for businesses in Solomon Islands. More nontraditional equity sources, such as early stage venture capital and crowdfunding, are also not available for SMEs. The government and CBSI are considering the potential of developing a capital market through one of two approaches; a national securities market or a regional exchange market. A regional stock exchange is one of the promising ideas that can be realized in collaboration with neighboring countries, delivering economies of scale. Despite the infancy of capital markets, the government is an active shareholder in the country’s state-owned enterprises (SOEs), which include utilities, water, electricity, airports, and an investment corporation. There has been some privatization of SOEs in Solomon Islands. In 2011, there were 11 SOEs, however Home Finance and the Sasape Marina were privatized, so now there are now SOEs active in the country.151 The Investment Corporation of the Solomon Islands (ICSI), one of the SOEs, was formed in 1988 and manages and administers the government’s commercial investment portfolio,152 while the SINPF directly owns shares in enterprises. For example, the SINPF owns 64.7% of Solomon Telekom Company (Our Telekom), while the ICSI owns 2.7% of the company’s shares.153 The SINPF also owns 25% of the Sasape International Shipyard, the successor to the Sasape Marina.154 The implication for SMEs and capital market development in Solomon Islands is that a system of equity ownership by multiple parties does exist—though mainly through the government—so a foundation exists for the future development of private equity systems. Policy and Regulation The newest piece of legislation which can benefit SME development in Solomon Islands is the Business http://www.mof.gov.sb/AboutUs/EconomicsUnit/ StateOwnedEnterprise.aspx 152 http://www.parliament.gov.sb/files/legislation/Acts/ 1988/ INVESTMENT%20CORPORATION%20OF%20SOLOMON%20 ISLANDS%20ACT%201988.PDF 153 https://www.ourtelekom.com.sb/our_telekom/about_our_telekom.php 154 http://www.sasape.com/company-profile.html 151 Solomon Islands Names Bill 2014,155 which was passed by the Parliament in June  2014 (Table 4.115). This new law will enable business name registrations (sole traders, partnerships, and companies) to be made online. This law will benefit more SMEs, for which saving time is a key priority. The implementation of the law was anticipated to begin in the first half of 2015. Though it was announced in 2013 that the MCILI was drafting an SME policy framework—which would include a recommendation for the establishment of a dedicated SME bank—as of end 2014, this had not progressed significantly, according to the CBSI. The National Development Strategy 2011–2020, which was adopted in 2011, has as one of its objectives the improvement of the enabling environment for growth led by the private sector. This includes support for entrepreneurs, business mentoring programs, and increasing access to finance. The Government of Solomon Islands used its resources to develop rural financing in the past. There was a heavily subsidized state-owned development bank, the Development Bank of Solomon Islands (DBSI), established in 1977. However, it ceased lending in 1999 and was ultimately closed in 2004, after years of poor lending performance, weak management systems, and large financial losses. This provides lessons on creating a specialized bank, i.e., the need to have a loan facilitation mechanism and a well-functioning internal control system, as well as an interest rate spread that can cover costs of operations. The National Financial Inclusion Goals continued to progress in 2014, though challenges to achievement remain. For example, the planned piloting of a financial education project via schools by 2014 was delayed,156 however a Financial Inclusion Exposition with the theme, “Know Your Money, Save and Grow”, was held in June in Honiara.157 Notably, the 2011 goal for 70,000 new Solomon Islanders to have access to financial services by the end of 2015 was easily surpassed—by the end of 2014 the accumulative total of new bank accounts opened since 2011 was 135,581, as reported by the CBSI. The increase was due mainly to the spread of branchless banking infrastructure and the simplification of Know Your Customer (KYC) identification requirements. http://www.companyhaus.gov.sb/system-content/feature/ CBSI 2014 Annual Report, pg. 36 157 http://www.bis.org/review/r140805b.htm 155 156 Asian Development Bank | Asia SME Finance Monitor 2014 291 Solomon Islands Country Review In addition, there has been an increase in the number of financial access points, from 439 at the end of 2013 to 538 by the end of 2014.158 There are now access points in all provinces of the country, largely driven by the use of digital financial services, such as mobile phone banking and electronic funds transfer at point of sale (EFTPOS) machines. Although there is no current credit union legislation in Solomon Islands, as of March 2015, there is a policy framework that is to be endorsed by the government, which will lead to a legislative bill being drafted for credit unions. One large public initiative, the Rural Development Program (RDP)159—funded by the Government of Solomon Islands, Australia, the World Bank, the European Union, and the International Fund for Agriculture Development (IFAD)—is a 7-year program (2008–2015) with a budget of $35 million. One of the program’s focus areas is to improve access to finance, by providing equity injections to rural businesses, which then are used to leverage recipient equity and bank loans. The RDP has also approved a second phase, which will be rolled out in the second quarter of 2015. An evaluation of the efficacy of the largest SME financing initiatives, such as the SMEC and the SISBEC, and the MSME policy implementation matrix can help to ensure that policy decisions are taken from an evidential base. Technical assistance from international sources may add value to these efforts. Finally, a review of the Small Business Finance Scheme may reveal reasons for decreased activity, and can lead to an improved approach to state policies on business financing. Table 4.111: Banking Sector—SME Loans Item  2010  2011  2012 2013 2014* SME loans outstanding (SI$ '000) 252,903 349,312 235,965 203,580 242,087 Corporate sector loans outstanding (SI$ '000) 523,242 510,936 602,500 727,009 796,225 Total bank loans (SI$ '000) 776,145 860,247 838,465 930,589 1,038,312 32.6 40.6 28.1 21.9 23.3 … 38.1 (32.4) (13.7) 18.9       Primary industry** (SI$ '000) 99,437 67,564 84,191 84,588 74,996       Manufacturing (SI$ '000) 70,169 63,115 57,055 54,056 73,260 SME loans to total loans (%) SME loans growth (%) Bank loans by sector       Construction (SI$ '000) 148,841 168,619 189,722 181,934 163,878       Transportation and communication (SI$ '000) 142,161 148,659 169,881 211,907 269,506 182,508 175,528 165,600 211,883 243,063       Service (SI$ '000)       Trade (SI$ '000) 55,724 145,004 75,777 70,696 98,383       Others (SI$ '000) 77,304 91,760 96,239 115,525 115,226 12.8 7.9 10.0 9.1 7.2 Primary industry** (% share) Manufacturing (% share) 9.0 7.3 6.8 5.8 7.1 Construction (% share) 19.2 19.6 22.6 19.6 15.8 Transportation and communication (% share) 18.3 17.3 20.3 22.8 26.0 Trade (% share) 23.5 20.4 19.8 22.8 23.4 Service (% share) 7.2 16.9 9.0 7.6 9.5 Others (% share) 10.0 10.7 11.5 12.4 11.1 SME = small and medium-sized enterprise. Note: Figures based on the Central Bank of Solomon Islands’ estimates. * data as of September 2014. ** Agriculture, forestry, fishery, and mining. Source: Central Bank of Solomon Islands. CBSI Annual Report 2014 http://www.solomonislands.embassy.gov.au/honi/261113.html 158 159 292 Asian Development Bank | Asia SME Finance Monitor 2014 Solomon Islands Country Review Table 4.112: Bank Loans—Bank South Pacific Item Loans outstanding (SI$ mil.) 2012 2013 2014/Q4 360 390 436 Loans by sector Manufacturing Primary industry* 14 16 22 Construction 30 35 40 13 Transportation Telecommunication Wholesale and retail trade 70 74 78 Real estate 135 110 120 Service Others 116 122 133 Capital city 330 335 395 Local cities 30 55 41 Loans by region Loans by type of use For working capital For capital investment 70 85 105 290 305 331 30 35 55 Loans by term Less than year 1–5 years 140 155 165 More than years 190 200 216 20 20 20 Loan rejection rate (% of total applications) Number of new loans 110 125 150 New loans disbursed (SI$ mil.) 225 250 250 22 15 NPL ratio (% to total loans) 6.1 3.8 1.8 Number of loan accounts opened 40 50 50 100 100 100 Nonperforming loans (NPLs) (SI$ mil.) Number of savings accounts opened Lending rate on loans (annual average) For working capital 12.5 12.0 11.0 For capital investment 10.5 10.0 9.0 Total loan average 11.0 10.5 10.3 2014/Q4 = the fourth quarter of 2014. * Agriculture, forestry, and fishery. Source: Bank South Pacific. Table 4.113: Credit Guarantees—Small Business Finance Scheme 2007 Number of loans guaranteed 2008 2009 2010 2011 2012 2013 2014/Q3 20 12 11 Guaranteed amounts (SI$ '000) 1,498 529 82 373 1,180 2,801 178 277 Total loan amounts (SI$ '000) 2,930 1,197 260 963 2,682 5,545 235 655 Share of loans guaranteed (%) 51.1 44.2 31.5 38.7 44.0 50.5 75.7 42.3 Source: Central Bank of Solomon Islands. Asian Development Bank | Asia SME Finance Monitor 2014 293 Solomon Islands Country Review Table 4.114: Nonbank Sector 2011 2012 2013 2014/Q3 Number of finance companies … … Number of new licenses … … Number of revocations … … Total financing outstanding (SI$ '000) … … 104,601 117,340 Primary industry* (SI$ '000) … … 13,401 17,089 Manufacturing (SI$ '000) … … 9,387 7,396 Construction (SI$ '000) … … 17,567 22,654 Transportation (SI$ '000) … … 25,246 26,919 Trade (SI$ '000) … … 21,487 22,443 Service (SI$ '000) … … 4,872 3,278 Others** (SI$ '000) … … 12,641 17,561 Primary industry* (% share) … … 12.8 14.6 Manufacturing (% share) … … 9.0 6.3 Construction (% share) … … 16.8 19.3 Transportation (% share) … … 24.1 22.9 Trade (% share) … … 20.5 19.1 Service (% share) … … 4.7 2.8 Others** (% share) … … 12.1 15.0 175 175 175 176 Number of new licenses Number of revocations 37.0 34.0 36.4 40.6 A. Finance Companies Financing outstanding by sector B. Credit Unions Number of companies Total financing outstanding (SI$ mil.) * Agriculture, forestry, and fishery. ** Loans to businesses that are operating in sectors not included in the reported sectors. Source: Central Bank of Solomon Islands. 294 Asian Development Bank | Asia SME Finance Monitor 2014 Solomon Islands Country Review Table 4.115: SME Policy and Regulation Regulations Name Outline Financial Institutions Act (1998) Regulation for banking business Secured Transaction Act (2008) Establishment of collateral registry Companies Act (2009) Formation and governance of private, public and community companies Business Names Bill (2014) Online registration for business names Credit Union Act (1986) Regulation for credit union activities Regulators and Policymakers Name Responsibility Central Bank of Solomon Islands (CBSI) Regulate and supervise commercial banks and nonbanks Ministry of Commerce, Industries, Labor and Immigration (MCILI) SME promotion policy Policies Name National Financial Inclusion Goals (2010) National Development Strategy 2011–2020 Responsible Entity MCILI Outline CBSI 1) Financial education for all 2) Access to financial services 3) Use of financial services to achieve financial stability and create business opportunities MCILI Increase awarenes of opportunities for small scale business development MFR MAL MAL = Ministry of Agriculture and Livestock, MFR = Ministry of Forestry and Resources, SME = small and medium-sized enterprise. Sources: Central bank of Solomon Islands; and the Ministry of Commerce, Industries, Labors and Immigration. Asian Development Bank | Asia SME Finance Monitor 2014 295 Solomon Islands Country Review Data Sources Asian Development Bank, Pacific Private Sector Development Initiative (PDSI); Bank of South Pacific Solomon Islands; Central Bank of Solomon Islands; Ministry of Commerce, Industries, Labors and Immigration; Solomon Islands National Provident Fund; Solomon Islands Small Business Enterprises Centre; Credit Corporation; The Company Haus of the Solomon Islands. References Central Bank of Solomon Islands. Annual Report 2013. Honiara. Central Bank of Solomon Islands. Annual Report 2014. Honiara. Central Bank of Solomon Islands. 2014. Monthly Economic Bulletin. February through November. Honiara. Central Bank of Solomon Islands. 2014. Monitoring and Evaluation Report as of End of May 2014. Honiara. Central Bank of Solomon Islands. 2013. Loan and Guarantee statistics. Honiara. September. Central Bank of Solomon Islands. 2013. Press Release. Solomons Commerce Ministry to support small and medium enterprises. 27 August. Central Bank of Solomon Islands. Press Release, 17/2014. Solomon Islands to Host Regional Microfinance Week. Honiara. Central Bank of Solomon Islands.2007. Small Business Finance Scheme Brochure. Honiara. Government of Solomon Islands, Ministry of Commerce, Industries, Labors and Immigration. 2013. Draft Micro, Small and Medium Enterprise Strategy. Honiara. September. Growth and Prosperity for Solomon Islands: Perspectives from the Solomon Islands Chamber of Commerce and Industry. Honiara. 296 OECD. 2012. Managing Aid for Trade and Development Results. Solomon Islands Case Study. Pacific Financial Inclusion Program. 2010. In Search of Sustainability: The Provision of Rural Financial Services in Sasape International Shipyard Limited. http://www.sasape.com/company-profile.html Solomon Islands Chamber of Commerce and Industry (SICCI). 2014. Enhancing SME Development for Economic Solomon Islands Government. Ministry of Finance and Treasury. http://www.mof.gov.sb/AboutUs/ EconomicsUnit/StateOwnedEnterprise.aspx Solomon Islands Ministry of Development Planning and Aid Coordination. National Development Strategy 2011 to 2020 Vision: A United and Vibrant Solomon Islands DRAFT FINAL, July 2011, Honiara. Solomon Islands Parliament. 1988. Investment Corporation of Solomon Islands Act (No. of 1988). Honaria. March. Solomon Islands Small Business Enterprise Center. 2013. Monitoring and Evaluation Report as of End of June 2013. Solomon Islands. Solomon Telekom Company Limited. https://www. ourtelekom.com.sb/our_telekom/about_our_ telekom.php The State Owned Enterprises Act 2007 (No. of 2007). Honiara. The World Bank. 1990. Project Completion Report, Development Bank of Solomon Islands (Credit 1115-SOL). World Bank Group. Doing Business 2015, 12th Edition, Going Beyond Efficiency, Economy Profile 2015, Solomon Islands. 2015. Note Currency: dollar (SBD) Exchange rate: SBD = 0.1283 USD Source: Central Bank of Solomon Islands, February 2015. Asian Development Bank | Asia SME Finance Monitor 2014 APPENDIX SME Definitions Central Asia Kazakhstan Type Item Micro Small Medium Legal entity and individual enterpreneurs Annual average income Annual average income of less than 30,000 times the monthly calculation index (MCI) Annual average income of less than 300,000 times the MCI Annual average income of more than 300,000 but less than 3,000,000 times the MCI Number of employees Annual average number of employees of fewer than 15 Annual average number of employees of fewer than 100 Annual average number of employees of more than 100 but fewer than 250 Note: Small businesses cannot be individual entrepreneurs and legal entities engaged in activities related to trafficking in narcotic drugs; psychotropic substances and precursors; production and/or the wholesale distribution of excisable products; activities for the storage of grain on grain-points; lotteries; activities in the field of gambling and show business; activities of mining, processing, and sale of petroleum, petroleum products, gas electricity, and thermal energy; activities related to trafficking of radioactive materials; banking (or certain types of banking operations) and the activities of the insurance market (other than an insurance agent); auditing activities; professional activities in the securites market; and activities of credit bureaus; protection activities; activities associated with weapons. According to the Law of the Republic of Kazakhstan on September 29, 2014 No. 54-V, the Monthly Calculation Index is equivalent to T1,731 in the national budget for 2013–2015. Source: Law on Entrepreneurship of the Republic of Kazakhstan (with amendments as of 29 September 2014). Kyrgyz Republic Item Number of employees Annual turnover (thousands of KGS) Micro Small Medium Type I (Agriculture, Construction, Mining, Manufacturing, Energy and Water management, Fishing) Fewer than 15 Fewer than 50 51–200 Type II (Trade, Services, Transport, Logistics, Telecom, Health, Education, Financial services) Fewer than Fewer than 15 16–50 Type I (Agriculture, Construction, Mining, Manufacturing, Energy and Water management, Fishing) Less than 150 Less than 500 500–2,000 Type II (Trade, Services, Transport, Logistics, Telecom, Health, Education, Financial services) Less than 230 Less than 500 500–2,000 Source: Government Resolution No.78 (1998), amended as Government Resolution No.590 (2002). Tajikistan Item Annual turnover Small (incl. individual entrepreneurs)* Medium > TJS500.000 TJS500.000–TJS15mil * The Law considers both legal and non-legal entities as a small enterprise. However, the following activities of small enterprises are prohibited: (i) excisable manufacturing, e.g., production of pharmaceuticals, spirits, and perfume; (ii) supply of primary aluminum; (iii) banking and insurance; (iv) investment funds management; and (v) stock market activities. Source: Law No.1107 on the Government Protection and Support of Entrepreneurship (2014). 297 Appendix SME Definitions East Asia People’s Republic of China Sector Item Micro Small Medium Agriculture Annual turnover (T) T ≤ CNY500,000 CNY500,000 < T ≤ CNY5 million CNY5 million < T ≤ CNY200 million Industrial Construction Wholesale Annual turnover (T) T ≤ CNY3 million CNY3 million < T ≤ CNY20 million CNY20 million < T ≤ CNY400 million Number of employees (E) E ≤ 20 20 < E ≤ 300 300 < E < 1,000 Annual turnover (T) T ≤ CNY3 million CNY3 million < T ≤ CNY60 million CNY60 million < T ≤ CNY800 million Total assets (A) A ≤ CNY3million CNY3 million < A ≤ CNY50 million CNY50 million < A ≤ CNY800 million Annual turnover (T) T ≤ CNY10 million CNY10 million < T ≤ CNY50 million CNY50 million < T ≤ CNY400 million Number of employees (E) E≤5 < E ≤ 20 20 < E < 200 Retail trade Annual turnover (T) T ≤ CNY1 million CNY1 million < T ≤ CNY5 million CNY5 million < T ≤ CNY200 million Number of employees (E) E ≤ 10 10 < E ≤ 50 50 < E < 300 Transportation Annual turnover (T) T ≤ CNY2 million CNY2 million < T ≤ CNY30 million CNY30 million < T ≤ CNY300 million Number of employees (E) E ≤ 20 20 ≤ E ≤ 300 300 < E < 1,000 Storage Annual turnover (T) T ≤ CNY1 million CNY1 million < T ≤ CNY10 million CNY10 million < T ≤ CNY300 million Number of employees (E) E ≤ 20 20 < E ≤ 100 100 < E < 200 Post Hotel Annual turnover (T) T ≤ CNY1 million CNY1 million < T ≤ CNY20 million CNY20 million < T ≤ CNY300 million Number of employees (E) E ≤ 20 20 < E ≤ 300 300 < E < 1,000 Annual turnover (T) T ≤ CNY1 million CNY1 million < T ≤ CNY20 million CNY20 million < T ≤ CNY100 million Number of employees (E) E ≤ 10 10 < E ≤ 100 100 < E < 300 Catering trade Annual turnover (T) T ≤ CNY1 million CNY1 million < T ≤ CNY20 million CNY20 million < T ≤ CNY100 million Number of employees (E) E ≤ 10 10 < E ≤ 100 100 < E < 300 Telecommunication Annual turnover (T) T ≤ CNY1 million CNY1 million < T ≤ CNY10 million CNY10 million < T ≤ CNY1,000 million Number of employees (E) E ≤ 10 10 < E ≤ 100 100 < E < 2,000 Software and information technology Annual turnover (T) T ≤ CNY500,000 CNY500,000 < T ≤ CNY10 million CNY10 million < T ≤ CNY100 million Number of employees (E) E ≤ 10 10 < E ≤ 100 100 < E < 300 Real estate Property management Annual turnover (T) T ≤ CNY1 million CNY1 million < T ≤ CNY10 million CNY10 million < T ≤ CNY2,000 million Total assets (A) A ≤ CNY20 million CNY20 million < A ≤ CNY50 million CNY50 million < A ≤ CNY100 million Annual turnover (T) T ≤ CNY5 million CNY5 million < T ≤ CNY10 million CNY10 million < T ≤ CNY50 million Number of employees (E) E ≤ 100 100 < E ≤ 300 300 < E < 1,000 Lease and business service Total assets (A) A ≤ CNY1 million CNY1 million < A ≤ CNY80 million CNY80 million < A ≤ CNY1,200 million Number of employees (E) E ≤ 10 10 < E ≤ 100 100 < E < 300 Others Number of employees (E) E ≤ 10 10 < E ≤ 100 100 < E < 300 Source: Regulations on SMEs Classification Criteria (2011) by Ministry of Industry and Information Technology. 298 Asian Development Bank | Asia SME Finance Monitor 2014 SME Definitions Appendix Republic of Korea Sector Item Micro Small Medium Manufacturing Number of employees Fewer than 10 Fewer than 50 Fewer than 300 Capital and sales … … Capital worth of W8 billion ($8 million) or less Mining, construction and transportation Number of employees Fewer than 10 Fewer than 50 Fewer than 300 Capital and sales … … Capital worth of W3 billion ($3 million) or less Publication, information, and communication; administrative and support service activities; human health and social work activities; professional scientific and technical activities Number of employees Fewer than Fewer  than 10 Fewer than 300 Capital and sales … … Sales worth W30 billion ($30 million) or less Agriculture, forestry, and fisheries; electricity, gas, steam, and waterwork business; wholesale and retail trade; accommodation and food service activities; financial and insurance activities; arts, entertainment, and recreation Number of employees Fewer than Fewer than 10 Fewer than 200 Capital and sales … … Sales worth W20 billion ($20 million) or less Sewerage, waste management, and remediation activities; education; repair and other services Number of employees … … Fewer than 100 Capital and sales … … Sales of W20 billion ($10 million) or less Real estate, rental and leasing activities Number of employees … … Fewer than 50 Capital and sales … … Sales worth of W5 billion ($5 million) or less Source: 1996 Framework Act on Small and Medium Enterprises, Small and Medium Business Administration (SMBA). Mongolia Sector Item Small and Medium General Number of employees ≤199 Annual turnover ≤MNT1.5 billion Number of employees ≤19 Annual turnover ≤MNT250 million Number of employees ≤49 Annual turnover ≤MNT1.0 billion Number of employees ≤149 Annual turnover ≤MNT1.5 billion Number of employees ≤199 Annual turnover ≤MNT1.5 billion Manufacturing Services Wholesale trade Retail trade Source: Article 5, Law on Small and Medium Enterprises (2007). Asian Development Bank | Asia SME Finance Monitor 2014 299 Appendix SME Definitions South Asia Bangladesh Sector Item Micro Small Medium Manufacturing Fixed assets Tk0.5 million-Tk5.0 million Tk5 million-Tk100 million Tk100 million–Tk300 million Employees 10–24 25–99 100–250 Service and Trade Fixed assets Less than Tk0.5 million Tk5 million-Tk10 million Tk10 million–Tk150 million Employees Fewer than 10 10–25 26–100 Cottage Fixed assets Less than Tk0.5 million Employees Fewer than or equal to 10 including family members Source: Bangladesh Industrial Policy 2010. India Sector Micro Small Medium Manufacturing Investment in plant and machinery does not exceed Rs2.5 million Investment in plant and machinery is more than Rs2.5 million but does not exceed Rs50.0 million Investment in plant and machinery is more than RS50 million but does not exceed Rs100 million Services Investment in equipment does not exceed Rs1 million Investment in equipment is more than Rs1 million but does not exceed Rs20 million Investment in equipment is more than Rs20million but does not exceed Rs50 million Note: Manufacturing enterprises are those engaged in the manufacture or production, processing, or preservation of goods, while services enterprises are those providing or rendering services. Source: Micro, Small and Medium Enterprises Development Act, 2006. Sri Lanka Item Small and Medium Annual turnover More than SLRs100 million and less than SLRs2,000million OR Fixed assets More than SLRs10 million and less than SLRs400 million Source: Mahinda Chintana Vision for the Future, Government of Sri Lanka. Southeast Asia Cambodia Item Micro Small Medium Assets $50,000 and below $50,000–$250,000 $250,000–$500,000 Number of employees 1–10 11–50 51–100 Source: Small and Medium Enterprise Development Frameword of 2005. 300 Asian Development Bank | Asia SME Finance Monitor 2014 Appendix SME Definitions Indonesia Item Micro Small Medium Net assets (land and building excluded) Less than Rp50 million Rp50 million–Rp500 million Rp500 million–Rp10 billion Total annual sales value Less than Rp300 million Rp300 million–Rp2.5 billion Rp2.5 billion to Rp50 billion Note: Micro, small, and medium-sized enterprises (MSMEs) should be a productive entity owned by individual or individual business unit that exclude the subsidiary firm or branch office that directly or indirectly owned and/or controlled by or being a part of larger firm. Foreign owned and/or invested firms are not regarded as MSMEs regardless of filling the above-mentioned. Source: Law No.20/2008 on Micro, Small, and Medium-sized Enterprises. Lao PDR Item Small Medium Number of employees (annual average) Fewer than 20 Fewer than 100 Total assets Up to K250 million Up to K1,200 million Annual turnover Up to K400 million Up to K1,000 million Note: The SME definition above is based on the Decree No.42/PM/2004. Meanwhile, the Law No.011/ NA/2011 on Small and Medium sized Enterprises Promotion stipulated the new SME definition but no numeric criteria. Accordingly, the government authorities practically use the SME definition stipulated on the Decree No.42/PM/2004. Source: Decree No.42/PM/2004 on the Promotion and Development of Small and Medium sized Enterprises. Malaysia Sector Item Micro Small Medium Manufacturing Annual Sales Turnover Less than RM300,000 OR  From RM300,000 to less than RM15 million OR From RM15 million to not exceeding RM50 million OR  Number of Full-time Employees Fewer than 5 employees From 5 to fewer than 74 employees From 75 to not exceeding  200 employees Annual Sales Turnover Less than RM300,000 OR  From RM300,000 to less than  RM3 million OR  From RM3 million to not exceeding RM20 million OR  Number of Full-time Employees Fewer than 5 employees From 5 to fewer than 29 employees From 30 to not exceeding 75 employees Services and Other Sectors Note: New SME definition was endorsed at the 14th NSDC Meeting in July 2013 and has been effective since January 2014. Source: SME Corporation Malaysia. Myanmar SME Definition (until April 2015) Item Cottage Small Medium Power used (horsepower) 0.25–5 H.P Over H.P 25–50 H.P Employees Not more than Over 10 50–100 Capital investment … Up to Ks1 million Ks1–5 million Annual production … Up to Ks2.5 million Ks2.5–5 million Note: SMEs refer to small and medium industries (manufacturing) under the Private Industrial Enterprise Law No.22/1990 and cottage industries under the Law Amending the Promotion of Cottage Industries Law No.14/2011. Source: Central Department of Small and Medium Enterprises Development, Ministry of Industry. Asian Development Bank | Asia SME Finance Monitor 2014 301 Appendix SME Definitions SME Definition (after April 2015) Sector Item Small Medium Manufacturing Capital (C) Up to Ks500 million Ks500 million[...]... published in April 2014, with 14 participating countries from five ADB regions: (i) Kazakhstan in Central Asia; (ii) the People’s Republic of China and the Republic of Korea in East Asia; (iii) Bangladesh, India, and Sri Lanka in South Asia; (iv) Cambodia, Indonesia, Malaysia, the Philippines, Thailand, and Viet Nam in Southeast Asia; and (v) Papua New Guinea and Solomon Islands in the Pacific The launch... global economic slowdown requires a new growth model for Asia, where SMEs play a key role in boosting national productivity Asia has been continuously growing, and this growth has alleviated poverty and increased the number of middleincome countries in the region However, the recent regional and global economic slowdown requires a new growth model for Asia, with strengthened dynamics for small and medium- sized... measures for SME access to finance in Asia and the Pacific Asian Development Bank | Asia SME Finance Monitor 2014 Regional SME Finance Update SME Landscape and Thailand), and 1 high-income country (the Republic of Korea) The Asia SME Finance Monitor (ASM) 2014 assessed 20 countries from five geographic regions; Central Asia, East Asia, South Asia, Southeast Asia, and the Pacific The participants included... 2014 3 Rationale and Methodology Figure 1.2: Data Compilation Flow South Asia Central and West Asia BAN, IND, and SRI KAZ, KYR,* and TAJ* Southeast Asia East Asia Pacific Asia CAM, INO, LAO*, MAL, MYA*, PHI, THA, and VIE PRC, KOR, and MON* FIJ, PNG, and SOL Country Counterpart Institutions Central bank, financial authority, line-ministries, SME agency, specialized banks, credit guarantee corporation/fund,... process, and authored several papers ADB hired: (i) one Australianbased consultant, for drafting a thematic study (mobile technology for financing SMEs in Asia) and for data collection and country paper write-ups in the Pacific region; (ii) one consultant from India in South Asia and one consultant from Kazakhstan in Central Asia, for data collection and country paper write-ups in priority regions where. .. since 2011, as the banking sector has gradually recovered A similar situation has unfolded in Mongolia A lack of comprehensive regulatory and policy frameworks for NBFIs is a critical barrier to developing the nonbank finance industry in Asia and the Pacific In Mongolia, leasing is not regarded as a nonbank financial activity, and is separately regulated from the Nonbank Financial Activities Law Although... that include guidance on how to fill up the data: a standardized data request form and a data update form (Figure 1.2) The standardized data request form (separate forms for SME landscape, banking sector, nonbank sector, capital markets, and policy and regulation) is delivered to the respective counterpart institutions in newly participating countries Data update forms, based on the data compiled in. .. out national SME data availability in DMCs, defined core data components to be included in the ASM, and developed methodologies for data collection and analysis It also built strategic partnerships with DMC institutions (central bank, government authorities, and financial institutions), and published a pilot product to assess the potential for creating a sustainable SME data platform in the Asia-Pacific... medium- sized enterprises (SMEs) to boost national productivity According to the latest data, SMEs accounted for an average of 96% of all enterprises and 62% of the national labor forces across the 20 Asia SME Finance Monitor (ASM) countries These countries cover Central Asia, East Asia, South Asia, Southeast Asia, and the Pacific Meanwhile, the latest data reveals that SMEs contributed an average of only... MFI Law was enacted after more than a decade of discussion Effective from January 2015, the Financial Services Authority (OJK) has started to regulate and supervise MFIs in Indonesia Besides MFIs, finance companies that deal with leasing and factoring play an important role in filling the supply-demand gap in MSME financing in Indonesia, whose financing stood at 3.6% of GDP at the end of 2014 financing . asset finance company AFI Alliance for Financial Inclusion AIF Alternative Investment Funds Regulations ANZ Australia and New Zealand Banking Group ASEAN Association of Southeast Asian Nations ASENSO. Cambodia, Indonesia, Malaysia, the Philippines, Thailand, and Viet Nam in Southeast Asia; and (v)Papua New Guinea and Solomon Islands in the Pacific. The launch seminar of the ASM 2013 was held at. developed. 7 Highlights Recent global economic slowdown requires a new growth model for Asia, where SMEs play a key role in boosting national productivity Asia has been continuously growing, and this growth has alleviated