Analyzing Delay Process in Banks for SMEs

The given assignment requires a detailed analysis of the delay process in banks, particularly focusing on the challenges faced by Small and Medium-sized Enterprises (SMEs). It highlights the importance of online applications in reducing delays and discusses the need for banks to cater to customers with varying technological expertise. The assignment draws from academic literature and online sources to provide insights into bank branch efficiency, credit scoring, and social capital among information technology and business units.

Static Growth in SME lending
1

Table of Contents
TASK...............................................................................................................................................3
High handling cost..................................................................................................................3
SME operational efficiency in processing bank applications.................................................5
Credit score Risk assessment in SME lending.......................................................................7
SME OPERATIONAL EFFICENCY IN PROCESSING CREDIT APPLICATIONS........8
Turn around time..................................................................................................................10
Customer delays...................................................................................................................11
REFERENCES..............................................................................................................................13
.......................................................................................................................................................14
2

TASK
High handling cost
According to views of Paradi and Zhu, (2013) it is stated that the term handling cost
means cash paid to cover the cost of performing a transaction, packaging, transporting and more
used in manufacturing process of a product by a company. Generally small companies used to
rise funds from money lenders, investors and from bank on fixed rate of interest.
Over some past years, it has been observed that charges rate of banks are much hiked and
increasing at rapid rate. Therefore, to handle such type of lending by small companies are so
difficult which affects performance of business. In context with small lending companies, they
used to provide loan to other firms and individuals for their business on easy terms and condition
from established banks.
Management of these organisations are needed to control internal rates of banks so that
they can attract more customers to provide loan to them on small rates. This would help them in
generating more profit.
With the change in course of time, technology has changed different kinds of lending
industry process and made this easier (Brooks and Mukherjee, 2013). Now SMEs can take loans
easily. There are some of the criteria that company can think while doing this entire process.
No need to borrow money which cannot be repay: While borrowing loan, first thing that
should be kept in mind is of time under which company can repay this money that was taken. For
example: while taking a personal loan EMI for this must not be more that 10% according to the
net monthly income.
3

Keeping tenure for short period of time: While taking loan long term repay system
should be avoided as with the increase in durations interest rates may gets higher which small
scale industries can find it difficult in paying the same.
Ensure timely and regular repayment: In case of repayment of dues, management of
SME are required to pay the same in disciplined manner. They should not miss such kinds of
payments which are linked with short-term and long-term loan for business.
Don't borrow to invest: It concerns with basic rules of investing which forbade small
firms to use borrowed money for invest purpose (Wagner, Beimborn and Weitzel, 2014). In
addition to this, ultra-safe investments such as fixed deposits, bonds and more also not needed to
use for loan payment.
In a country, SMEs are considered as the backbone in context with economic
development. As per Moro and Fink, (2013), it has stated that about 97% to 99% of total
organisations running in UK, SMEs help in making this nation as best among top ten competitive
countries. As per incomplete characteristics of market information in terms of credit, SME face
different problems related to credit rationing.
It results to low economic status of such companies and ambiguous information structure
through which small firms are often subject to demanding credit constraints as compared to those
organisations which operate at large level. To overcome from this kind of issues, management of
these companies apply measures as per approval of public financial bodies for inadequate market
mechanism. It includes policy oriented loans, credit guaranteed scheme supported by
government and so on.
4

In addition to this, institutions which work in finance sectors, used to receive deposits
from public therefore, they are considered as relatively conservative as per lending policy. In
case of recession period, conservative lending practices carried by banks and financial
institutions used to impose a credit squeeze on company in sharp manner. Under this condition,
SME's are observed as one who bears the burnt more than large companies (Paradi and Zhu,
2013).
SME operational efficiency in processing bank applications
On the basis of view point of Cowling, Liu and Ledger, (2012) it has been stated that
small scale firm arrange money for doing activities in better manner. Without ability to manage
process of loan orientation in effective manner.
There are many developments are ascertained in technologies which enable small
organisation is use them for the purpose of ease of their different transactions. There are many
bank applications are emerges which improve the operational efficiency of bank regarding
raising of funds in short period of time.
This will termed as the main reason through static growth is ascertain in SME lending.
For example: Now small scale industries don't have to stand for a long queue for the approval of
bank loans. Bank are taking help of new tools and technologies along with some applications so
that time can be reduced and work can be done in quick time. Digitalisation has changed the
entire procedure of filling up of application forms and now clients don't have to face the long
process of documentation.
As per point of view Du, Guariglia and Newman, (2015) It is important for every small
business organisation to keep proper fund to operate their business in most effective manner. For
5

this, SME make their operational efficiency appropriate. This will lead in operating all the
process of banking application. In this context, small business can easily apply to bank and
another financial institution such as commercial loans, credit unions and so on. As small business
so not take loan to start a new business but they make loans for their ongoing business in which
they should follow all the procedures towards the loan application process (Cenni and et. al.,
2015). In addition of this, for taking loan SME should make a plan and make the appointment
with loan officer.
(Sources: SMEs contribution to GDP. 2011)
6
Illustration 1: Contribution of SMEs

From above mention graph, it can be said that SMEs contribute on average 53 percent of
GDI. On the other hand in United Kingdom, contribution of small business organisations have
raised up GDP of this country. This can be considered as a good position that has been carried by
United Kingdom in all over world (SME Clients: Do It Smart, Win Their Hearts, 2011).
Credit score Risk assessment in SME lending
As per views of Moro and Fink, (2013) Credit score is being considered as a numerical
appearance. These numbers rely on different levels of small business firm’s credit limit. In
regulatory body of any country, it is being found that ample number of small business enterprises
are doing business at small level but they are generating small amounts. Because of involvement
of capital which is applied by owner risks can be huge if business do not run in a successful
manner (Akkoç, 2012). Some of nature is being showed in a survey where small and medium
sized organisations and these are given below:
 Lenders check past record of SME in order to their credibility.
 Lenders seek specific requirements that needs to be fulfilled by SME's so that they
can lend money as per needed amount.
 At the time of lending, lenders seek collateral security.
Henceforth, it is much required for SMEs to look at all the aspects and then only go for
borrowing loan by looking at appropriate credit (Einav, Jenkins and Levin, 2013). On the other
hand, it is responsibility of bank to look at the credit score before lending the loan so that no
fraudulent activities may take place. But, government of any country have made various policies
so that SMEs of this country do get into problem while doing business. Because these are the
organisations that majorly impacts positively on economic conditions of this Qatar.
7

Apart from this, it has also been analysed that in most of the companies around 50% of SMEs
have granted Certification. But the accreditation was not being granted.
SME OPERATIONAL EFFICENCY IN PROCESSING CREDIT APPLICATIONS
Credit processing solution is getting changed from the past few years to the current
period. In past years, it was hard for anybody to take advantages of credit opportunities in a
manual term. These activities are all related to different services that provided by individual's to
others in the terms of money on the basis of their requirement and need.
Now a days, these services are provided by financial institution as well as banks. They
use manual as well as automate lending option for these services. The information on these
application is basically consider analysis of lender's past history, earnings status and abilities to
repay amount of credit at proper time period. This process takes a proper time to provide proper
approval for a credit loan (Brooks and Mukherjee, 2013).
In this, different teams and level of operations are analyse effectiveness to perceiving
different activities. At a time, different banks uses manual tools and spreadsheets to review and
analyse several terms properly. These activities are based on process of loan approval approaches
that take a specific time but not such organisations are adopt automate techniques to proceed
quickly for approval. There are different terms determine below that used to efficiently
processing loan application as-
Inside Mindtree's Flexible – This term basically uses in advance monitoring processing
activity in which technology uses as integrated manner as well as securely. Main objective of this
process is reduce risk within loan process and activities. This is a most specific and beneficial
approach that result as a convenient platform for firm as well as individual.
8

All these activities and procedures are used to manage corporate loan life-cycle (Wagner,
Beimborn and Weitzel, 2014). Through this, banks can easily manage their activities in effective
as well as appropriate manner. The Mindtree process basically determine as a pre-build approach
which is beneficial for each bank to processing easily in terms of credit approaches. This is a
most beneficial and specific process that aid to maximise productivity and reduce extra
approaches to manage time related terms in specific manner.
Credit processing solution – Now a days, organisations uses different kind of activities
for credit proceeding terms. These approaches are based on different element that working as a
proper structured format. In this, employees of organisation collect data of customers on the
basis of required documentation and information files.
After this employees assist to provide proper information to particular candidate about
credit risk rating. Loan servicing system is also a part of this activity that uses to provide
facilities to individual on the basis of organisational policies and terms. All these activities assist
in credit processing solution approaches of banks and financial bodies.
Existing IT infrastructure are determine reporting approach, control and analysis or
document management activities. Through this, manager of this division can manage proposal
process to analyse proper timing for final approval (Cowling, Liu and Ledger, 2012). All these
activities are held on automotive technique to manage vast information within a specific storage.
By implementing such tools as Mindtree's the credit processing solution get End to End
benefits as -
 These kind of procedure assist to improve efficiency and productivity to manage
data in proper formation.
9

 These kind of business activities are totally updated by implementing new
modification and alteration. These approaches assist to insert new terms in business
process and inactivities.
 These kind of approaches used to classify task to different person to accomplish
them properly till the approval limits.
 By implementing such tools, management control risk and security related issues
and that can impact directly on credit processing.
 All these approaches create transparency properly in the perspective of customers
to build trust in their minds as well as to build long term relations.
Turn around time
Turnaround time term can be understood as the time span from application of a loan by a
customer till the final allocation of loan amount. It has been analysed that in modern world,
majorly whenever SMEs looks to expand or to improve productivity (Du, Guariglia and
Newman, 2015).
They go for loans because of lack of capital in their hands. Rise in competition among
small and middle sized company's has impacted positively on banks. Here, providing loan to
business firms can be said is the main aim of Banks. Therefore, it is being found that Banks are
speeding up the Turn around time of providing loans or sanctioning it. With the help of this, it
can be said that organisations can now easily look into different aspects through which many
benefits can easily be gained by them.
Like appropriate funds at the time of expansion or to make modifications in operations
(Cenni and et. al., 2015). Through this, it can be said that firms are easily hitting their targets
10

because of appropriate money are continuously getting fulfilled. Some of major lenders of Qatar
like HSBC, Barclays, Lloyd and many more have reduced turn around time from application of
loan to sanctioning the funds to half. This have impacted positively on economic conditions of
Qatar as well.
Managers and leaders of Banks have mentioned that, reduction in turn around time can
has helped them in improvising bank's efficiency along with performance. They have also stated
that with the help of this, customers base have also been increased which impacted positively on
percentage of satisfaction that they were providing to customers before.
It also affected positively on their expenses as well. Because, in previous years people
used to wait for a longer period of time may be for months. But nowadays, when customer puts
an application of asking for loans or for some other credits it can be said that there are ample
number of situations which a person or SMEs have to go through.
But the time span have got reduced from months to few days. Digitalisation has helped
banks in improvising performances. Because of this, money can easily be transferred from one
place to another with in few seconds (Moro and Fink, 2013).
Customer delays
It has been analysed that, consumers mostly faces ample number of issues when they
reaches a bank to take loan or for some other service. As per analysis, Britain's largest banks that
are much faster in nature mentioned that, around 56 days on an average they are taking to
sanction a loan after when an application of customer reaches to them. During, 2007, UK banks
went through financial crisis. This happened because banks enhanced number of delinquencies
mortgages. The impact was really very huge which declined over all macroeconomic activities.
11

Therefore, this was the reason where Banks started going through credit scores of companies and
of person and makes surety that if they can repay it or not (Cowling, Liu and Ledger, 2012).
Because of this, customers of these banks face delays in all the processes. On the other
hand, most of employees of banks are of middle age which are not aware of new and updated
technology. This can be considered as a reason which can slower down the transactional process
at bank that may irritate its consumers. Scenario which has discussed above may raise conflicts
among executives of banks and customers. These issues may also pull up thinking in mind of
users that they should end up accounts and open in another which is faster and cooperative.
Delay process can be reduced to zero, if banks will provide online applications to their
customers. Through this, it can be said that delay process can easily be reduced if this facility is
being provided by bank where person can easily transfer the money without going at bank.
On the other hand, it has also been analysed that most of people who are having age
around 50, do not know how to use online applications. Therefore, it is required for banks to take
various initiatives through which customer may get good experience through less delays in
different processes (Brooks and Mukherjee, 2013).
12

REFERENCES
Books and Journals
Paradi, J. C. and Zhu, H., 2013. A survey on bank branch efficiency and performance research
with data envelopment analysis. Omega. 41(1). pp.61-79.
Brooks, R. and Mukherjee, A. K., 2013. Financial management: core concepts. Pearson.
Wagner, H. T., Beimborn, D. and Weitzel, T., 2014. How social capital among information
technology and business units drives operational alignment and IT business value.
Journal of Management Information Systems. 31(1). pp.241-272.
Cowling, M., Liu, W. and Ledger, A., 2012. Small business financing in the UK before and
during the current financial crisis. International Small Business Journal. 30(7). pp.778-800.
Du, J., Guariglia, A. and Newman, A., 2015. Do Social Capital Building Strategies Influence the
Financing Behavior of Chinese Private Small and Medium–Sized Enterprises?.
Entrepreneurship theory and practice. 39(3). pp.601-631.
Cenni, S., and et. al., 2015. Credit rationing and relationship lending. Does firm size matter?.
Journal of banking & finance. 53. pp.249-265.
Moro, A. and Fink, M., 2013. Loan managers’ trust and credit access for SMEs. Journal of
Banking & Finance. 37(3). pp.927-936.
Akkoç, S., 2012. An empirical comparison of conventional techniques, neural networks and the
three stage hybrid Adaptive Neuro Fuzzy Inference System (ANFIS) model for credit
scoring analysis: The case of Turkish credit card data. European Journal of Operational
Research. 222(1). pp.168-178.
13

Einav, L., Jenkins, M. and Levin, J., 2013. The impact of credit scoring on consumer lending.
The RAND Journal of Economics. 44(2). pp.249-274.
Online
SME Clients: Do It Smart, Win Their Hearts, 2011. [Online]. Available through:
<https://www.atkearney.com.au/en/financial-institutions/ideas-insights/article/-/
asset_publisher/LCcgOeS4t85g/content/sme-clients-do-it-smart-win-their-hearts/
10192>.
14