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In a league of your own?

Summary: Is it time for your SME to step up a league? Omer Ghani discusses HPL's USP and solutions ua

HPL is a business performance accelerator for small to medium -sized (SMEs) organised as a League that consists of teams composed of SMEs and multi national company (MNCs) that collaborate to achieve greater outcomes. HPL brings industry leaders, business owners and entrepreneurs together in an ecosystem that accelerates growth generating long term economic progress and sustainable jobs.

HPL has 11 teams, each composed of 11 SMEs (as 'Team Players') and one large corporate (as 'Team Owner'). Each Team is formed around a business theme (e.g. Health and Wellness, E-commerce, Healthcare, etc.). The Game is played by taking actions to improve business performance - achieved by collaborating with team players, team owner and as well as by utilising the League's benefits. The team that delivers the best business performance will be the HPL champion. The League provides participants with enablers including cost optimisation, visibility, training, and governance, thereby capturing economies of scale, and releasing resources (i.e. people, capital and time) to focus on core competencies.

LACK OF CAPITAL

As a result of the global economic crisis, in response to tighter liquidity conditions, higher asset losses, and perceptions of higher credit risk, banks became more reluctant to lend and some were forced to deleverage.

Only 20 per cent of SMEs in the MENA region have a loan or a line of credit (a lower share than any other region) and 10 per cent of their investment expenditures are financed by a bank loan. It is estimated that the total unmet need for credit by SMEs in the region today is in the range of $110-140 billion. SME bank financing is acutely low in the UAE; while SMEs constitute 90 per cent of all businesses and contribute 40 per cent of the UAE's GDP, they receive less than four per cent of total bank loans issued across the UAE.

As such, banks have realised the potential profitability of the SME market: (i) a strategic sector for growth; (ii) either unleveraged or underleveraged; and (iii) remains largely underserved.

In order to significantly and sustainably scale-up SME access to financial services, banks need to improve SME lending and risk management practices; SMEs need to adopt the best practices and procedures to become more creditworthy themselves; and governments need to accelerate policy and legal reforms improving their business enabling environments, legislative and regulatory frameworks.

CORPORATE GOVERNANCE

Obstacles cited with respect to serving the SME segment include: (i) Quality of financial reporting; (ii) Weak credit information and lack of credit history; (iii) Lack of transparency and weak cash flow management; (iv) Inadequacy of collateral, weak creditor rights, insolvency regimes and collateral infrastructure; and (v) Lack of well-functioning payments and settlement system.

The High Performance League addresses these requirements, by enabling SMEs to better position themselves for bank financing and equity capital through an embedded corporate governance regime.

LEVERAGING TEAM DYNAMIC

The League is the first organising system which has been created on the principle of organising in teams to deliver greater outcomes. Forming teams of companies with skill complementarities, synergy and chemistry, combined with an MNC and delivering a performance index so that spectators can watch and cheer the progress. This combination is unique to HPL and motivates HPL participants to play as a team and therefore, catalyse business performance.

SMEs recognise the opportunities offered by internationalisation, and gaining access to international markets has become a strategic imperative. However, exporting SMEs are largely ill-prepared for the challenges and risks that await - characterised by a market's configuration of legal, regulatory, administrative, policy and cultural dimensions. Organised as teams in the High Performance League, enables SMEs to enter and grow in international markets much easier than trying to do it alone.

Omer Ghani is a Founder at HPL and has over 25 years' experience across a diverse spectrum of initiatives that include media, strategic consulting, real estate, manufacturing and investment banking. He was also a founding member of CNBC Arabia, the first 24-hour Arabic language business news channel in the Arab World.

2013 CPI Financial. All rights reserved.

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Publication:financeME
Date:May 31, 2013
Words:698
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