Singapore is ranked the No 4 city for profitable small and medium-sized enterprise (SME) financing globally, according to a new research by MasterCard.
Emerging top centres of commerce for SME financing are Paris, Tokyo and Munich in MasterCard Research's ranking of 53 global cities. The global revenue opportunity for financial institutions from SME financing is estimated at $5 trillion.
The study looked at the size of the unmet SME financing need, potential for profit for banks in providing financing and the relative ease of market penetration within each city.
Cities such as Paris where there are dense concentrations of SMEs with limited access to financing from local banking systems, show the greatest profit potential.
Traditional world banking centres, such as New York, may be less ideal candidates for market expansion because there is already an abundance of existing credit providers and highly accessible credit markets. the study shows.
In the Asia-Pacific, Middle East and Africa (APMEA) region, Tokyo and Singapore emerged first and second respectively. They are among frontrunners in the potential size of its SME financing market, said Kelvin Mellyn, global solutions leader of payment strategy at MasterCard Advisors LLC, who headed the study.
Tokyo is in a sweet spot, with its total SME market valued at $628.6 billion, he noted. The SME sector in Singapore - valued at $176.46 billion - also presents an opportunity in developing new revenue streams and helping to advance the economy.
'Despite Tokyo's well-developed financial economy, its high ranking in the index can be attributed to the fact that SMEs currently have limited access to financing from the local banking system,' Mr Mellyn said.
Despite the current challenging conditions, there are still sizeable and profitable business opportunities available in the global SME financing sector for financial institutions, said Walt Macnee, president of global markets at MasterCard Worldwide.
Banks that can navigate the challenges and complexities of these cities may enjoy tremendous upside, he added.
This article was first published in The Business Times on September 25, 2008.
