News: Citibank takes a micro view

(DNA 13/12/2006) Mumbai - Citibank has stepped up efforts to reach out to the under banked. After having launched biometric ATMs, the bank is now targetting small businesses.

“Small businesses and professionals are a priority for Citibank and we are committed to make business products for this segment,” said Rajiv Jamkhedkar, head of personal loans and business banking, Citibank.

The bank launched an offering for the small businesses and professional space - Citibusiness Power Access- on Wednesday. It is a privilege network, offering a suite of business and financial solutions and services, targeted at small businesses and professionals.

Citibank’s suite of such products was launched in May is year and the loan book has grown by over 50%. The bank, whose small business loans comprise 35-40% of its total retail lending, expects the new offering to accelerate growth further. Jamkhedkar expects a 25% growth in business next year.

The bank plans to focus on merchants, traders, small exporters, services providers and business professionals with annual turnover of less than Rs 50 crore. There is no minimum turnover, Jamkhedkar said. “We give business loans as low as Rs 3 lakhs and 5 lakhs. (In fact) small loans comprise 35% of the total loans from Citibusiness”

“The idea given the distribution challenges is to expand to a suite of customers,” explained Madhulika Gupta, director, corporate affairs, India, Sri Lanka and Bangladesh, Citibank.

The bank had commissioned a survey on small businesses “to understand their evolving needs, long term business plans and future outlook of this sector.” The study was conducted in five Asian countries, namely, Hong Kong, Singapore, South Korea, Malaysia and India with 677 respondents, 175 of which were in India.

‘The ability of small businesses to get into a close relationship with customers, to be flexible in pricing, and to make quick decisions gives them the advantage over their larger competitors,” the study found.

Shortage of finances and skilled staff were the main hurdles for more than 80% of the respondents. Funding for more than 70% of small businesses was either through personal savings (50%) or financing for banks.

Interestingly, 44% of the Indian businesses would like to grow their business and then pass it on to a professional management, while only 33% said they wanted to pass it on to their children. However, 51% of those who inherited their business said they wanted to pass it on to their children.