Member Pulse Survey 2022 – SME Finance in the New Normal
In March 2022, we launched our 10th pulse survey with more targeted questions to understand how our members and their SME clients are adjusting to the new normal. We received responses from 118 member institutions operating in 181 economies. Among the respondents, 83 are lenders and 35 are non-lenders.
Level of Operation
The overall story here is very positive. Compared to their level of operations in the pre-COVID-19 pandemic level, the majority of the respondents report that their operations have recovered in 2022. Twenty-four percent say that their operations have already reached the pre-COVID level, and 48 percent say that their level of operations has already surpassed that in 2019. For respondents whose level of operations is still below 100 percent of the pre-COVID-19 condition, 63 percent expect to recover within the following 12 months.
The COVID-19 pandemic has significantly accelerated the digital transformation of the SME finance sector. Some 69 percent of members acknowledge that the crisis has significantly fast-tracked their digital transformation. In this round of pulse survey, 39 percent of respondents say that a high number of their customers and sales originated through digital channels, up from 16 percent a year ago. Interestingly, the share of respondents who reported low or no sales through digital channels decreased from 40 percent to 25 percent.
Compared to 2021 responses, more members have fully digitalized their MSME client operations. For example, 55 percent of members have completed the digital transformation of KYC and onboarding and 66 percent have fully digitalized loan applications, while in 2021 these shares were 18 percent and 41 percent, respectively. Payment services are a segment of MSME client operations that have been fully digitalized by almost all of the respondents, i.e., 86 percent. Additionally, some members digitize document storage and exchange, training and capacity building, and loan guarantee issuance.
Similarly, an increasing number of members have adopted new technologies as part of the digitalization of their processes and services. From 2021 to 2022, the share of survey respondents who adopted cloud computing increased from 51 percent to 60 percent. Seventy-nine percent implemented an application programming interface, up from 73 percent.
Many respondents now partner with fintech firms or are thinking of doing so. Some 44 percent of members affirmed that they have already done so and 24 percent are considering such a partnership.
Eighty SME lenders participated in the survey and their responses convey a quite positive message regarding SME recovery post-COVID-19.
Fifty-three percent of lenders have reached or surpassed their pre-COVID-19 pandemic level of loan collections. While 34 percent say that their loan collection level is at 75 – 100 percent of their pre-crisis level. And 69 percent of lending institutions report that their loan disbursement level is at 100 percent or greater compared to their pre-crisis level.
For those who are experiencing a decline in lending, the main reasons identified by our members include the cost of funds/increase of interest rates, government liquidity support directed to SMEs, as well as deterioration in portfolio risk profile. Some members are also facing liquidity pressure due to a decline/delay in loan collections and an increase in provisioning and collection expenses.
Credit guarantee schemes have been in the spotlight since the onset of the COVID-19 pandemic. According to this survey, 45 percent of lenders are already leveraging their services. And this trend is projected to increase with 39 percent of respondents suggesting that they will use credit guarantees more in support of new loan originations in the following 12 months.
In the next year, some lenders expect challenges in meeting new demands from SMEs. They pointed out various important factors, such as riskier businesses due to economic outlook, lack or higher cost of funding, and higher foreign exchange costs.
The non-lenders are generally optimistic about their operations in the next 6 months. Seventy-one percent expect higher revenue and 17 percent expect about the same revenue. In terms of the number of active customers, 74 percent believe that they will have more customers and 14 percent expect no change. In 2021 Q1, only 66 percent of members believed that their revenue would grow in the next 6 months.
Overall, our members are working towards a sustainable recovery in the new normal fueled by accelerated digitization. What do you make of these data? What questions do you have? Feel free to reach out and let us know!