Success drivers of small business banks in developing economies: four case studies compared with the IFC's SME banking value chain created by Clifton Kellogg

Do banks that focus on small businesses in developing economies possess distinguishing attributes? The team studied four leading small business banks in developing economies and compared their practices with the SME banking value chain in the IFC SME Banking Knowledge Guide. The case studies confirmed most elements in the value chain; however, three additional overriding success drivers were observed: 1) management commitment to small business customers; 2) loan officers’ skills in outreach to customers and in preparation of credit memos; and 3) the creation of efficiencies in lending. At the same time, other activities in the banking value chain proved less crucial to these banks’ success: 1) bundling and cross-selling non-lending products; 2) the separation of business development and risk management functions; and 3) the use of customer and profitability data to fully refine their banking model. Further case studies and benchmarking will help the industry continue to refine its banking models.