BANDAR SERI BEGAWAN – With more than $700,000 in disbursements since April, Brunei’s recently-established SME bank said it aims to provide funding for at least 60 businesses by the end of 2018.

CEO of Bank Usahawan Udo Schedel said the bank is looking to finance SMEs outside the oil and gas industry, in a bid to diversify economic activity in the country.

“We see potential in agricultural business and trade/export, as well as fintech and environmental businesses,” he told The Scoop in a recent interview.

“What entrepreneurs should do is look for a problem that needs solving. For example, China is now blocking imports of plastics for recycling because of the sheer volume. How does this present an opportunity for recycling businesses?”

So far, most of the bank’s potential clients have been food manufacturing SMEs wanting to scale production.

“We see a lot of these kinds of businesses approach us, but we would like to see more innovative SMEs breaking through,” Schedel said.

Bank Usahawan CEO Udo Schedel (L) and COO Mukhammadjon Khakimov. Photo: Ain Bandial/The Scoop

‘More accessible funding’

Since its establishment in September 2017, Bank Usahawan’s outreach team has contacted more than 400 businesses and also conducted entrepreneurship programmes at local universities, providing seed financing to budding entrepreneurs.

The CEO said what sets the financial institution apart from conventional banks is the speed of processing — its approval process typically takes up to six weeks, but in one case a disbursement was made within 10 days.

“Usually business owners don’t have the chance to talk to the CEO of bank, but we have a more individual approach, there is no hierarchy here,” Schedel added.

Mukhammadjon Khakimov, the bank’s chief operations officer, said their assessment model differs from conventional banks, putting more emphasis on business viability over collateral.

“Of course all banks require financial reports and a sound business plan, but we understand that providing collateral is challenging for many business owners, so we offer flexible collateral options, allowing them to borrow against cars, equipment or other fixed assets.”

Khakimov said the bank’s profit rate for each disbursement varies from case to case, but averages out to 6.5 percent. Repayment periods also vary from five months to five years, depending on the SME’s cash flow projections.

As a syariah-compliant bank it uses a “declining method” to calculate the profit rate based off the remaining balance to be paid, as opposed to a flat rate which is based off the total amount loaned – and remains the same throughout the repayment period.

“We are not trying to compete with other banks on pricing, but trying to provide a more individual approach and more accessible funding for SMEs,” Schedel added.

The CEO said the bank can approve financing of up to $750,000 per application, for businesses owned by Brunei citizens and permanent residents which have been operating for at least 12 consecutive months.