“ASEAN is a bright spot,” says Federico Burgoni, head of Group Strategy and Transformation at Singapore’s United Overseas Bank.

Founded as a five-nation political and economic community in 1967, the Association of South-East Asian Nations today counts 10 countries and 647 million people under its umbrella, boasting a 2023 GDP of $2.9 trillion. It is also the US’s fourth-largest trading partner; thanks in part to the cooling of economic relations between Washington and Beijing, foreign direct investment into ASEAN hit $224 billion in 2022, with the US being the largest investor.

There have been growing pains; plans to create an integrated, tariff-free common market by 2025 have been hampered by domestic protectionism and, more recently, the Covid-19 pandemic. But experienced Southeast Asia hands express optimism.

“ASEAN is backed by strong fundamentals, including a young population, a dynamic labor force and rising foreign direct investment,” says Burgoni. Total FDI for the region hit $228.9 billion in 2023, almost doubling the 2015 take of $118.7 billion.

Burgoni expects growth in the region to remain strong owing to a benign combination of domestic demand, moderating inflation, and increasing inward trade and investment flows.

“Yes, there are some geopolitical risks [US sanctions from Trump, a war in Taiwan, etc.], but in Asia we think Southeast Asia is the bright spot,” he says. “ASEAN is one of the fastest-growing trade blocs and is now seen as a production base and a growing consumer market to both the West and to China.” That stands in contrast to China and many Western economies.

By 2030, 65% of a projected population of 750 million is expected to be middle class, based in part on resilient internal demand. Crucially, countries like Malaysia and Indonesia are rich in oil and minerals of all kinds.

But tech investors are eyeing the region as well.

“There is no ASIA—but there is, increasingly, an ASEAN,” says Bill Padfield.

Padfield is a tech veteran and founding CEO of Salamander Advisory, a consultant to early-stage tech companies. A global technology and business leader in the region for over three decades, he was formerly global senior vice president of Transformation at NTT, and before that chairman and CEO of Dimension Data Asia Pacific and CEO of SGX-listed Datacraft Asia. He also helped lead Equant, now Orange Business Services, to a successful simultaneous IPO on the New York Stock Exchange and the Paris Bourse.

“Although it’s not one trading block, ASEAN is actively learning from Europe’s errors,” says Padfield. Pressing on too quickly with regulatory and economic integration creates political opposition—national sensibilities need to be respected.

Major tech players including Google, Amazon and NTT have set up operations in the region. Global Foundries last year completed a $4 billion expansion of its microchip facilities in Singapore, and Nvidia and AMD are eyeing the region’s artificial intelligence potential.

“Notably, investment in the electric vehicle sector soared to $18.1 billion in 2022,” Padfield adds, “marking a 570% increase from 2021’s $2.7 billion.”

In a sign of how the global investment community views Singapore as a financial and tech powerhouse, the London Stock Exchange now has 350 full time employees there.

“Amazingly, we calculate that there are more than 400 venture capital funds registered in Singapore with $8 billion in funds,” says Padfield, “and more than 4,000 tech startups already active.”

Collectively, Apple, Microsoft, and Invidia have committed billions of dollars in investment to the ASEAN economies, he adds, and their CEOs have all been “hobnobbing with heads of state from Indonesia to Malaysia,” he notes.

Singapore was in the spotlight last month when Amazon took over a giant venue in the city-state to unfurl a fresh $9 billion investment plan. In Malaysia’s Johor Bahru, which adjoins Singapore, Nvidia teamed up with a local operator last year to build a $4.3 billion AI data-center park. CEO Jensen Huang was been seen in Vietnam enjoying street food and is rumored to be reviewing Hanoi and Da Nang as possible centers for future investment.

Hoping to build on Big Tech’s interest, ASEAN is currently hammering out an ASEAN Digital Economic Framework Agreement (DEFA), the first of its kind worldwide, which is projected to triple the region’s digital economy from $300 billion today to almost $1 trillion by 2030. Progressive rules (like the greater deregulation, the faster the growth) in the DEFA would double this value contribution, unlocking $2 trillion to the region’s digital economy.

 “I think you can honestly say that the days of playing second fiddle to China are well and truly over,” Padfield concludes.

AI will play a big role in that shift, says consultant Kearney, which estimates that AI adoption could add $1 trillion to the ASEAN economy by 2030. A specific catalyst will be generative AI, adds Tony Nash, a long-term resident of the region and a former adviser to the Chinese government on its global Belt and Road Initiative who founded Complete Intelligence, which provides AI-driven forecasting to major companies in Asia and worldwide.

Much will depend, however, on the region’s ability to further integrate.

“ASEAN consists of about a dozen politically, culturally, and geographically disparate countries,” Nash notes. “While progress has been made, stubborn protectionist tendencies and conflicting national interests continue to impede the full realization of this ambition.”

That said, “there are continuing indications that ASEAN is benefiting from the cracks in China’s economic armor,” he adds. As tensions with the West persist and concerns over supply chain dependencies grow, multinational corporations continue to diversify their operations into Southeast Asia.

“Vietnam, in particular, has emerged as a manufacturing hub,” says Nash, “luring investments that might have previously favored the Middle Kingdom. And the tech majors are embracing the region’s low-cost but technically savvy workforce.”

Acutely exposed to climate change, ASEAN has also been forward-looking in its efforts to decarbonize its economy.

Initiatives such as the ASEAN Strategy for Carbon Neutrality, the Framework for Circular Economy, and the ASEAN Blue Economy Framework aim to help the region transition to a green economy while creating significant economic value-add. Malaysia and Thailand are pulling in renewable investments, often in partnership with leading Chinese tech suppliers seeking to escape onerous US tariffs on exports from the mainland.

From a US investor’s perspective, ASEAN’s selling points are manifold. “The region boasts a burgeoning middle class, abundant natural resources and a strategic geographic position astride vital trade routes,” says Nash. Its relative political stability and pro-business policies could prove alluring, especially as the world grapples with an increasingly fragmented economic order.

Close observers also generally agree that Singapore’s status as Southeast Asia’s preeminent financial hub is assured, at least for the foreseeable future.

“The city-state’s impressive economic dynamism, robust legal framework and business-friendly policies have solidified its position as a gateway to the region,” says Nash. But it has equally savvy neighbors.

“Upstart challengers like Jakarta and Kuala Lumpur are keen to emulate Singapore’s success,” Nash adds, “capitalizing on their own strategic advantages, which include a scale that Singapore lacks and the insatiable appetite for capital across ASEAN’s economies. Prudent due diligence, selective local partnerships and a long-term outlook are prerequisites for success in this complex yet immensely promising region.”

This was his third presidential run.

Prabowo holds the dubious distinction of having been banned from entering the US due to allegations of atrocities in East Timor, a ban only lifted in 2020.

He will assume the presidency at what would otherwise be a propitious time. With 274 million people and a 2022 GDP of $1.2 trillion, Indonesia became an attractive target for foreign investors during current president Joko Widodo’s two terms. But he brings a mixed legacy to the post.

“Prabowo is a product of the Suharto era,” says Maria Monica Wihadja, visiting fellow at the ISEAS-Yusof Ishak Institute and professor at the National University of Singapore.

Despite being Suharto’s son-in-law, he was rumored to have engineered the 1998 riots that ousted the long-time dictator. Wihadja is concerned whether Prabowo will stick with the reform model that has made Indonesia attractive to investors.

“Continued investment relies on institutions and institutional continuity” she says. “Prabowo has in the past campaigned for an end to term limits, for example.”

Southeast Asia’s largest economy has seen strong growth since the Covid pandemic, particularly as investment in its nickel processing industry booms.

GDP grew 5.3% in 2022, supported by domestic consumption and further bolstered by the commodity exports as global prices of coal, palm oil, and iron have rallied. Indonesia also captured $43 billion in FDI in 2022, the highest total in the country’s history.

Leadership questions are especially timely given that OECD accession is on the agenda.

“Indonesia’s application is the first from Southeast Asia, one of the most dynamic growth regions of the world,” notes OECD Secretary-General Mathias Cormann. “As the largest economy in Southeast Asia and the world’s third largest democracy, Indonesia is a significant global player, providing important leadership across the region and beyond.”

Lack of access to finance has typically been the key challenge facing African SMEs. However, limited access to markets is emerging as a much bigger problem.

For a majority, operations are constrained in their home markets. Due to factors like different regulatory frameworks, tariff and nontariff barriers and multiple taxation regimes, among others, only some venture beyond their borders.

The African Continental Free Trade Area (AfCFTA) promises to be a game changer for SMEs. The agreement is expected to increase intra-African exports by more than 80%.

Ecobank, the winner as Best SME Bank in Africa, is positioning itself as the ideal partner for SMEs to exploit AfCFTA opportunities through access to new markets, negotiation of logistical hurdles and scaling of operations. The bank’s Pan-African footprint makes it a natural fit for intra-African trade.

This year, Ecobank has launched the Single Market Trade Hub. “The hub will help SMEs access new markets,” says Carol Oyedeji, Ecobank’s acting group executive for Commercial Banking.

She adds that besides being an information repository about AfCFTA, the hub is a marketplace for businesses offering access to a full range of financial products and solutions such as trade finance, cash management, working capital and advisory.

The hub and the bank’s RapidCollect regional collection offering eliminate obstacles to cross-border operations. In 2022, when it was launched, RapidCollect achieved transaction volumes amounting to $431 million in its first year.

These interventions and offerings put the bank that operates across 33 markets at the heart of SMEs’ success in Africa.          —John Njiraini

Singapore-headquartered Oversea-Chinese Banking Corporation (OCBC) has won accolades as 2024’s Best SME Bank in the Asia-Pacific region for its creative and enthusiastic support of SME clients during torrid times and for impressive digital innovation.

The bank works with 130,000 SMEs in Singapore alone—an estimated 50% of all SMEs.

OCBC also has been successful in accelerating sustainability efforts—achieving carbon neutrality on operations during 2022, with $10 billion in new sustainable finance investment in energy-efficient technology across Singapore, Malaysia and Greater China as part of an industry-leading target of $50 billion by 2025.

The bank scored very highly on its aggressive digitization of core operations with an investment of $250 million as the first part of the “digital core roadmap,” refreshing key channel systems across markets to enable faster rollout of digital features. These include client personalization capabilities driven by innovative artificial intelligence (AI) and machine learning.

Personal portfolios in Southeast Asia are far more likely to include nonfungible tokens (NFTs) than in Europe or the US, mainly due to the young demographic of the newly wealthy. In the fast-growing world of digital assets, and in conjunction with the bank’s 90th anniversary, OCBC minted its first NFT for staff  in late 2022 on the bank’s in-house blockchain platform. This was given to staff to commemorate the special occasion.

The bank increased total income by $11.7 billion in 2022 and grew shareholder returns by an eye-watering 18% during this torrid period—a nearly 60% increase in 2020.     —Simon Littlewood

Banreservas, in operation since 1941, strives to serve the SME  segment and won this year’s Best SME Bank in the Caribbean. It has a 23% share of the SME market, which represents 14% of the bank’s total business—contributing $1.23 billion to the bank’s $8.54 billion portfolio. From April 2022 to March 2023, the bank issued 21,091 loans to 15,066 SMEs, totaling $648.5 million.

Significant SME programs include Fomenta Pymes Banreservas and subofferings such as Programa Preserva, Programa Coopera and Programa Prospera.

Fomenta Pymes (“Promotes SMEs”) is a comprehensive suite of financial offerings designed to meet SMEs’ growth needs. It provides financing facilities, credit cards and free management and payroll services. It also sponsors programs to promote financial education, entrepreneurship and economic development.

Programa Preserva promotes a savings culture for sustainable economic well-being, providing financial education workshops. Programa Coopera promotes social projects to produce goods and services in economically vulnerable communities. During 2022, this program assisted 457 groups in starting business co-ops. Programa Prospera works to provide technical advice, financial services, and risk management to organizations that strive to facilitate new business development. —Laura Spinale

Headquartered in Costa Rica, BAC Credomatic brings SME services throughout Central America, including Costa Rica, Honduras, Guatemala and Panama. Founded in 1952, the bank now serves 4.2 million clients, 1.9 million of whom use the company’s digital banking platform. Its SME client base consists of about 260,000 businesses. Its digital offerings include payroll services, supplier payment services, tax help, exporting help and international payment capabilities.

Financing for SMEs runs from standard business loans to more-specific offerings. The bank also provides development financing for technically and financially viable business projects.   — LS

The winner as Best SME Bank in Central and Eastern Europe is Československá obchodní banka (ČSOB), which has successfully grown its SME portfolio and customer base despite the high interest-rate environment. The bank has about 140,000 SME clients, and SME loans compose about 11% of its portfolio. Customer growth resulted partly from the bank’s new digital onboarding services, a vital part of the customer-centric business model.

ČSOB has focused on developing deep relationships with SMEs and broad product portfolios while becoming a leader in sustainability practices. The bank’s portfolio of digitized products includes solutions for lending, banking, financial markets and trade finance that SMEs can access through various apps.

The bank also strongly focuses on digitization and has created a virtual branch in its mobile app to help SMEs easily access its products and services. With the bank’s digitization effort, SMEs can use data for peer benchmarking, market analysis and industrial insights.

In 2020, ČSOB introduced a digital assistant, “Kate,” which uses artificial intelligence (AI) and data to help SMEs self-service in the bank’s digital channels so customers can better address their needs. More than 90% of customers are eligible to use the digital branch. ČSOB has recently introduced functionality that calculates and offsets an SME’s carbon footprint.

To help SMEs transition toward sustainability, ČSOB partnered with Green0meter, an environmental, social and governance (ESG) data platform that assists in reporting. This partnership will help SMEs meet the EU’s changing ESG requirements more efficiently while providing an ESG marketplace.          —Andrea Murad

BTG Pactual Empresas marches toward the future bit by bit and byte by byte. It metamorphosed into a fully digital bank in late 2021, designed to serve business customers better. As a result, it now provides SMEs with a “variety of quality products and services with low service cost and less bureaucracy.” Businesses have responded favorably. The bank’s business loan portfolio has increased an astonishing 227% from 2019, to 143 billion Brazilian reais (about $29 billion). SME loans represent about 10% of that total, including lending solutions for rural credit needs and solar financing. BTG Pactual Empresas also provides client advisory services for ESG agendas.

The digital bank’s platform, which is available online and from app stores for iOS and Android, enables speedy service. For example, more than 99% of new customers have fully functional accounts within an hour of signing up.

The platform also offers digitized services that have been developed to support SMEs and other businesses. These include open banking (enabling users to manage all accounts, regardless of bank, in one place), multiuser accounts, online invoicing, payroll processing, collection management, foreign currency exchange, and a host of other services. All told, SMEs can choose from more than 30 business automations—including those available through Google Workspace. Live customer support is available 24/7 via the user’s channel of choice (chat, WhatsApp, email or phone). When users need actual paper money, bank partnerships enable fee-free withdrawals from a broad network of ATMs. —LS

At Arab Bank in Jordan, SME business accounts for nearly 12% of the total portfolio. As of June, the bank had a total SME loan value of $824 million, including $165 million in loans issued between the first quarter of 2022 and the first quarter of 2023. A staff of 35 dedicated employees serves more than 12,000 SME customers—representing a 12.6% share of the SME market in Jordan—through 21 dedicated SME centers. Other support channels include a 24/7 customer care center and digital platforms.

While the bank serves an extensive range of SMEs, it mainly targets businesses in the medical, professional, training and recreation, beauty and wellness, and retail sectors—along with home-based businesses led by female entrepreneurs. These and other SMEs turn to Arab Bank for a broad array of financing capabilities, including financing against point-of-sale proceeds, medical loans, vehicle loans, revolving lines of credit and trade finance products.

Arab Bank is also active on the digital front. Its Arabi Next mobile application, launched in 2022, was developed specifically to meet the needs of Jordanian SMEs. Its features include self-registration, a dashboard displaying company accounts, bill management capabilities, funds transfer services, document retrieval, salary management and cardless ATM withdrawals. A payment gateway enables SMEs to accept credit and debit cards and Apple Pay and Android Pay payments. The Arabi E-Mart platform enables SMEs to sell products and services online, while Arabi Shopix helps SMEs build their websites. Another significant digital offering is the bank’s supply chain financing platform. It helps SMEs optimize cash flow by empowering them to pay their suppliers early with Arab Bank financing.          —LS

With more than 17 million customers and employing more than 89,000 people, the Royal Bank of Canada is a multinational financial services organization with more than 1,200 branches—one of Canada’s largest banks. It offers SMEs a broad range of “lending, leasing, deposit, investment, foreign exchange, cash management, auto dealer financing, trade products, and services,” along with digital cross-border banking solutions, according to the bank.

In 2022, it granted more than $12.6 billion Canadian dollars (about $8.8 billion) in small-business loans. Its digital platform includes SME services for marketing, payments, payroll and business operations. Among these services is Ownr, a platform that helps entrepreneurs start, manage and grow their businesses. RBC Insight Edge, meanwhile, is a business dashboard offering data-driven insights to help businesses make more informed decisions about their customers and markets. It employs anonymized credit and debit card information, combined with demographic and location data, to offer business owners improved insight into the markets in which they operate.

—LS

For the second year in a row, Santander was chosen as the top SME bank for Western Europe. With offices in Spain, the UK and Portugal, it provides financial products and services to more than 4 million SMEs worldwide. SMEs are one of the bank’s largest customer segments, composing over 90% of the bank’s corporate customers in Portugal. The bank focuses on international trade, green finance and education to help SMEs prosper.

The bank has established platforms and programs to enable SMEs to develop an international presence. Santander Trade provides information on global markets for trade finance, and Santander Trade Club matches companies with an import or export counterpart. The bank replicates best practices across its European footprint through its One Europe strategy.

Santander provides green-finance and sustainability offerings  as clients transition to a low-carbon economy. These include financial products for purchasing, constructing and renovating green buildings and developing sustainable and protected agriculture. The bank also assists companies with renewable energy initiatives by financing renewable-power and low-carbon infrastructures.

With Santander X, the bank provides resources and training so that SMEs can scale and help communities prosper. Santander has specific tools to assist SMEs, like Santander X Explorer, a preincubation program that works with SMEs as they transform ideas into value propositions and sustainable businesses; and Santander X Launch, which helps SMEs bring that project to market and raise capital.    —AM

As the global economy continues to limp along, small and midsize enterprises (SMEs) will keep facing an uphill climb in 2024—whatever corner of the world they happen to occupy. The International Monetary Fund forecasts that GDP growth in emerging and developing economies will fall to 4% in 2023 from 4.1% in 2022 and remain at 4% in 2024, while GDP in advanced economies will drop to 1.5% this year from 2022’s 2.6% and to 1.4% in 2024.

SMEs can expect to face stronger headwinds in a sluggish economy than their larger brethren. Large corporations tend to have balance sheets that can weather the knock-on effects of such challenges as the Russia-Ukraine war, the current Middle East conflict, rising energy prices, tighter monetary policies, and governments’ cessation of pandemic support measures. For SMEs, stingier capital markets and the breakdown of open trade in favor of national self-reliance in many economies are making growth even more difficult.

This does not bode well for the global economy. Approximately 99% of businesses worldwide are SMEs, representing 60% of the business value-add, according to the OECD October 2023 SME and Entrepreneurship Outlook Polixy report. Small and midsize businesses are critical “to drive a resilient, inclusive and sustainable recovery,” the report’s authors warn.

One of the most important lessons the pandemic has taught businesses is the necessity of digitalization: from improving online and mobile access for clients to virtualizing their organization’s infrastructure. Social media and cloud computing have become mainstream for most SMEs, the OECD report’s authors note, with use of the latter doubling in the past six years.

Unlocking the value hidden in the data will be critical. A World Economic Forum survey of 111 SMEs in 42 countries and 21 sectors found that “74% struggle to maximize the value of their company’s data investments.” More than half of those polled (55%) experienced difficulty finding data, and slightly fewer (54%) had difficulty maintaining their data.

“The greatest acceleration in digital diffusion in recent years has been in the conduct of big data analysis—albeit from low levels—and the purchase of cloud computing services,” says Sandrine Kergroach, head of SME and Entrepreneurship Performance, Policies and Mainstreaming at the OECD Centre for Entrepreneurship in a 2021 OECD report. “The adoption of business intelligence and supply chain management software have progressed little, especially among the smallest firms.”

Yet, the development of open banking standards, the sharing of application programming interfaces (APIs), and the rise of the sharing economy have begun to increase the value of SMEs’ internal data. That makes selecting the proper banking partner more critical than ever.

Firms need to balance access to the cheapest capital against the value-add of the technologies and other services banks can provide. This year’s World’s Best SME Bank Awards recognize those financial institutions that stand head and shoulders above their competitors in serving their SME client base.      —Robert Daly

The editors of Global Finance, with input from industry analysts, corporate executives and technology experts, selected the winners of the World’s Best SME Banks 2024 based on a mix of objective and subjective factors. Editors consulted entries submitted by the banks and the results of independent research. Entries were not required.

Judges considered performance from April 1, 2022, to March 31, 2023. Global Finance then applied a proprietary algorithm to shorten the list of contenders and arrive at a numerical score of up to 100. The algorithm weights a range of criteria for relative importance, including knowledge of SME markets and their needs, breadth of products and services, market standing and innovation.

Once the judges narrowed the field, they applied the final criteria, including scope of global coverage, size and experience of staff, customer service, risk management, range of products and services, execution skills and use of technology. In the case of a tie, the judges lean toward local providers rather than global institutions. The panel also tends to favor private-sector banks over government-owned institutions. The winners are those banks and providers that best serve the specialized needs of SMEs.

For the second year running, the Brazilian digital bank BTG Pactual Empresas has swept the Best SME Bank awards for Brazil, Latin America, and the world. The bank has eased access to capital for micro, small, and midsize enterprises (MSMEs), representing approximately 90% of Brazilian companies.

Clients get a low-touch digital channel, available 24/7, that nevertheless provides a high-touch experience using open banking standards and Brazil’s PIX instant payment system. For example, BTG Pactual Empresas has shortened the time needed to obtain credit to about 30 minutes for clients participating in rural credit programs, solar-power and green financing, and women-owned businesses. Newly opened SME accounts are operable within an hour.

Once an SME account is open, account owners can export their banking data to standard spreadsheets, Microsoft Excel and Google Sheets, and enterprise resource planning (ERP) applications, instantly reconciling accounts in their ERP systems.

BTG Pactual Empresas provides such additional services as single-sign-on multiuser and multibusiness accounts, online invoicing, collection management, budgeting capabilities, foreign currency exchange and digital receipts, along with payroll, insurance, and tax and investment services. Clients can reach expert support any time via chat, email, WhatsApp and toll-free calling.       —RD

Vietnam enjoys a wealth of the features that foreign capital has come to love. In an aging world, it boasts almost uniquely favourable demographics, as 40% of its population of 100 million are under 25. It has a 1,300-kilometer land border with China, and therefore direct access to that market of 1.2 billion consumers; low wage costs; and a large, well-educated labor force. Its manufacturing base, meanwhile, benefits from the problems of its neighbor to the north, and through its membership in ASEAN, it has tariff-free access to 800 million more people across Southeast Asia.

Outside investors are getting the message.

“The 2023 outlook for the business environment in Vietnam shows promising signs of improvement,” says Thierry Mermet, CEO of Source Of Asia (SOA), a consultant to companies looking for business opportunities in Vietnam and ASEAN. “The capital from foreign direct investments reached around $10 billion [over Q1 of 2023], showing a rise of 0.5% compared to the same period last year.” SOA projects the pattern to continue. “Our projections for the next quarter are looking just as positive. Companies are actually expecting similar levels of foreign direct investment to keep coming in.”

Longer term, he says, “Vietnam is really cementing its position as one of the top three places where European business leaders want to invest.” According to the Business Confidence Index report from EuroCham, he notes, “3% more leaders have picked Vietnam as one of their top three investment choices. It’s a solid indicator that we’re on the right track.”

Ninety countries have invested in Vietnam in the first half of this year; the top five are Asian countries, with South Korea in first place, accounting for $81 billion and Singapore second with $72 billion. Japan follows in third position with nearly $70 billion committed. Notably, while the US trails in seventh position with investment capital of $USBN, it is also Vietnam’s first key export partner, accounting for almost $110 billion in 2022.

“Thomson Medical Group is one of the largest Singaporean private providers of health care services for women and children, and is  set to buy FV Hospital [in Ho Chi Minh City] in what’s being called the biggest health care deal in Vietnam,” says Mermet. Valued at $381 million, the deal not only opens up a market presence in Vietnam for Thomson but positions the country “to leverage growing medical tourism opportunities from our neighboring countries.”

Another indicator of Vietnam’s pull is homegrown electric vehicle manufacturer VinFast, which recently became the world’s third-largest automaker by market capitalization, behind Tesla and Toyota.

“With shares surging 20%, VinFast’s valuation hit an impressive $191.2 billion,” notes Barry Elliott, vice president of Tomkins Ventures and a supply chain guru long active in Vietnam. “This not only signals a promising future for the EV industry in Southeast Asia in general, but also exemplifies Vietnam’s emerging prowess in manufacturing.” VinFast now has plans to establish a plant in North Carolina.

Vietnam is also benefiting from the fallout of the US-China trade war, as higher US tariffs on a wide range of Chinese exports drive companies to switch their manufacture of exports away from China toward alternative hubs in Asia.

“This trend has been further reinforced by the Covid-19 pandemic,” says Elliott, “as protracted disruptions created turmoil in global supply chains for many industries, including automobiles and electronics.” The Japanese government nudged the trend along in 2020 by introducing a subsidy program for Japanese companies relocating production out of China, either back to Japan or to certain other designated countries.

“Since 2020, Vietnam has been one of the preferred destinations for Japanese firms choosing to shift their production to the ASEAN region in the first round of subsidy allocations,” Elliott notes. “This trend continues.”

The US, meanwhile, is boosting its economic and technical ties with Vietnam as Beijing grows more assertive in the region.

The recently disclosed establishment of a “comprehensive strategic partnership” give the US a diplomatic status that Vietnam has so far reserved for only a handful of other countries: China, Russia, India, and South Korea. The move was confirmed by a senior Biden administration official and two people in Hanoi familiar with the matter.

The deal, expected to be announced officially during President Biden’s state visit to Vietnam in September, is the latest step by his administration to deepen relations in Asia. For Hanoi, the closer relationship with Washington provides a critical counterweight to Beijing’s influence.

“This shows that Hanoi is willing to risk angering Beijing but sees the move toward Washington as necessary, given how aggressively China is flexing its military muscle in the region,” says Derek Grossman, senior defense analyst at the Rand Corporation. “If you have the US on the same pedestal as China, that is saying a lot to Beijing, but also to the rest of the region and to the world. That’s saying the US-Vietnam relationship has come a long way since 1995,” when the two countries normalized relations.

On a recent trip to Ho Chi Minh City, Jacqueline Poh, managing director of Singapore’s Economic Development Board (ED,B) met with startups in financial services, robotics, and renewables. She noted the great influence of a returning diaspora with deep experience abroad, tagged approvingly by the Vietnamese as “sea turtles.”

“All have a can-do spirit, support for each other, and gumption,” says Poh. ”This heady mix has created a conducive local startup ecosystem.”

Poh also cited the growth of the Vietnam-Singapore Industrial Parks (VSIPs), the first of which were established in 1996 and now number 17 across 10 locations “The existing 14 VSIPs have garnered $18.7 billion in investment so far and have created 300,000 jobs in Vietnam,” she notes.

Incentives driving the rise in foreign direct investing, says Carsten Ley, founder and managing director of Asia PMO, which advises companies on operations in Vietnam, is a “China plus one” risk mitigation model aimed at forestalling on China by building redundancy in at least one other regional center. As a case in point, Ley cites Apple, which recently moved iPod production from China to Ho Chi Minh City, where most manufacturing is located. “Many Korean companies are also investing,” he says: “Samsung, LG on the IT side. Lego just opened a huge factory outside Ho Chi Minh.”

As this suggests, Vietnam is now moving up the value chain from shoes and garments toward high tech, including Vietnamese fintechs such as payment providers Momo, ZaloPay, and VNPay, and foreign startups.

“As a consequence of this and other factors,” says Ley, “a rapid growth in capital expenditure is expected, reflecting continued strong foreign direct investment by multinationals as well as domestic infrastructure spending.”Given the volume of large-investor interest, it’s no surprise that venture capital is becoming a presence in Vietnam as well. My Tran, principal of local VC investor Jungle Ventures, previously spent a year and a half at VinaCapital Ventures, which is the country’s largest local VC firm and now focuses on pre-A and A-stage investments.

Now based in Ho Chi Minh City—her firm “it’s called Jungle Ventures because we invest very diversely in emerging markets”—My focuses on industries including technology in Southeast Asia and India. Jungle Ventures’ five current investments in Vietnam include Kiotviet, a maker of POS/store management software; Edupia, the country’s largest on-line education company with over 500,000 student subscribers; Medici, an insurance and health care provider; Timo, a digital bank; and Dat Bike, the biggest electric bike manufacturer in South Asia.

VC funds in Vietnam are sourced from all over the world, My notes, with a growing interest from the west, including the US. Yet she acknowledges two main challenges.

“The regulatory framework, especially for financial services, is complex,” she says. “There are foreign ownership limits. But it is possible to invest in insurance, for example, up to limits.”

The second challenge is language and communication; Vietnamese over age 40 did not learn English in school, although it is now taught to all.

These issues notwithstanding, My remains confident. “The best is yet to come,” she says.

As investors scratch their heads over China’s increasingly cautious attitude toward foreign capital—with no near-term expectation of clarity—many are taking a fresh look at another economy with close ties to the East Asian behemoth: Thailand. With its population of 69 million and a high-speed rail link into China due to open to travelers in 2028, Thailand’s economy is already projected to grow 3.6% in 2023, up from 2.6% last year, on stronger private consumption.

The World Bank bases that projection in part on a rapid recovery in the tourism sector and strong pent-up demand following China’s reopening. Thailand’s newly revamped Board of Investment (BOI), meanwhile, is offering incentives for inward investment in key areas, along with a chain of special economic zones.

“We handle FDI [foreign direct investment] projects and have seen a distinct increase in investment activity over the past few years,” says Aime Pinyapa Somphong, managing partner at TWLS Law Group in Bangkok. “The uptick was evident even before Covid-19, but from mid-2022 it has been especially strong.” The biggest source of interest is from China, Aime notes.

Although Thai voters recently chose reformers over the country’s longstanding military-political leadership, it remains to be seen how much change can be wrought through parliamentary wrangling.

The BOI is eager to encourage the trend. In 2021, it unveiled the Bio-Circular-Green Economic Model, a strategic plan that aims to boost Thailand to its next level of development by focusing on four industries: agriculture and food; medical and wellness; bioenergy, biomaterial, and biochemical; and tourism and the creative sector. The BCG includes tax incentives for foreign investors in Thailand that can help achieve BCG’s goal of net-zero emissions.

While the Bank of Thailand has trimmed its growth forecast for 2023, citing external risks and an expected global slowdown, Piti Disyatat, director of economic research in the bank’s Monetary Policy Group, said recently that he expects growing strength in the tourism sector to lessen the impact of any global softening.

“The economy has good momentum, while inflation, albeit easing, remains higher than that in the past,” Piti says, “so [rate] normalization will have to continue. Our task going forward is to ensure that the economic recovery is stable.” He still projects Thai GDP to grow close to 4% in 2023, ahead of the World Bank’s projection, and for the baht to continue to strengthen against the US dollar.

While China and India are much larger economies, Thailand is not perceived as posing as many problems for outside investors, according to Chris Cracknell, chairman of Grant Thornton in Thailand.

“There is a sense that Southeast Asia—and specifically ASEAN member countries with mutual free trade agreements already in place—are the place to land if you can’t do China due to supply uncertainty and political risk,” he says. Thais refer to China as “big brother,” he notes, pointing out that Thailand is well positioned within ASEAN to offer a base for manufacturing and distribution with direct and improving logistical links to China to the north as well as the rest of Asia. The special economic zones on its eastern seaboard have attracted much inward interest, he adds. 

The profile and direction of future economic growth were issues in last month’s national elections. “After the bruising impacts of Covid-19, there is an awareness on all sides that the economic base needs to be broadened away from agriculture and tourism, which between them comprise 60% of GDP,” says Peter Hone, an energy industry expert with 30 years of experience in Thailand and the region. “Both the incumbent prime minister [Prayut Chan-o-cha, who had served since seizing power in a military coup in 2014] and campaigning opposition leaders have emphasized the importance of new FDI,” promising to continue investment in the Eastern Economic Corridor (EEC) and focus more on the neglected southern provinces bordering Malaysia.

The EEC, a special economic zone in eastern Thailand straddling the three provinces of Chachoengsao, Chonburi and Rayong, was established in 2017 and enjoys significant tax and capital advantages. “The concessions in this zone, and the growing infrastructure, have been major factors in attracting investment,” says Aime. The area boasts new ports and other infrastructure, and new projects including a semiconductor wafer fabrication plant to be built by Chinese investors.

Hat Yai, the largest city in the southern region, could be the next economic powerhouse in the region,” Niphon Bunyamanee, deputy leader of the Thai Democrat party, said recently, given the political tension in Hong Kong and land scarcity issues in Singapore.”

What sectors are likely to see the most growth? “Medical and health tourism,” says Hone, “and a strong move towards sustainability via the BCG, which stresses the development not merely of renewable energy but also of alternative sources of protein in the food chain. One Chinese waste management company already collects waste and plastic scrap and converts it to electricity or to new plastic pallets (PDPA).”

Thai leaders and planners are sensitive to how their country stacks up in comparison with Singapore, which is seen as the benchmark for governance and stability in the region, says Cracknell, and is now offering “inter alia regional operating headquarters tax concessions” to lure multinationals out of the high-cost island state. Along with these are import/export tax exemptions on approved projects. “Significantly, Thailand is now allowing foreign [corporate] ownership of land for the first time. For a long time, a local partner was required.”

US investors and businesses have long had favored access to the Thai market. The Treaty of Amity and Economic Relations Between the Kingdom of Thailand and the US, inked in 1966, allows—uniquely—for American citizens and businesses incorporated in the US or in Thailand to maintain a majority shareholding or to wholly own a company in Thailand and thereby engage in business on the same basis as would a Thai national. Under the treaty, these companies are also exempt from most of the restrictions on foreign investment imposed by the Thai Foreign Business Act of 1999.

Nevertheless, the UK-based Lucy Group has made a major commitment to the Thai EEC.

“When we started to seriously diversify around 2010, we decided we needed another manufacturing base,” says Carl Sellick, regional CEO of Lucy Group, which supplies electrical distribution systems and switch gear across the world. “We chose Thailand because, under the rules, we didn’t need a local partner—unlike Malaysia. We decided to invest in the EEC. Unlike our competitors ABB, Siemens and Schneider, we manufacture in Thailand, and as long as we re-export our products, are free of local tax.”

Lucy Group benefits from a seven-year tax holiday on profits, with taxes limited to 50% of the normal rate for the next 10 years. Thailand provides a base for the company in ASEAN as well as points north to China.

“We have been delighted by our success in Thailand,” says Sellick. “Nearly 20% of our product is now sold here, 40% in ASEAN under the terms of the regional free trade agreement and the rest across APAC.”

The Made in Thailand label “is very important to our hosts,” Sellick points out, “and at this point many government bodies choose to buy our products; 75% of the 20% sold locally goes to government-related companies via the MEA [Metropolitan Electricity Authority], which are generally easy to deal with. We made the right decision.”

Early signs this year suggest that other foreign companies and investors see Thailand the same way, says Aime. “We expect FDI to increase this year and are getting many more enquiries. Many investors are seeing that Thailand enjoys both domestic scale and increasing connectivity with the key markets of the PRC—to the north—and the ASEAN free-trade area with its 800 million people.”

Cross-party political consensus on the need to develop a southern economic zone and a new growth- and infrastructure-oriented government in Malaysia also augur well for regional rail and road infrastructure.

The change in Malaysian leadership following the 2022 election may signal a historic shift in the country’s economic fortunes. The postcolonial coalition political structure, which endured for 61 years from independence until 2018, has given way to less paternalistic and more-inclusive politics.

As caution over China grows, Malaysia—with its common law heritage, educated English-speaking workforce and significantly lower costs than its smaller neighbor Singapore—offers investors an alternative.

The progress made in early 2023 by Prime Minister Anwar bin Ibrahim’s incoming administration in critical areas of economic and political reform will send a clear signal to investors looking away from China.

“For the past 12 months, we have seen significant inward investment activity in three main sectors: renewable energy, manufacturing and technology,” says Cassandra Thomazios, a Kuala Lumpur-based partner who heads the corporate and investment team at MahWengKwai & Associates. She adds that the new government has set attraction of foreign direct investment (FDI) as one of its main goals, providing abundant tax and other initiatives.

Investments from companies in Canada, China and Japan have been increasing. The FDI from China alone amounted to more than $180 billion in 2022. Renewables are big, as the country’s “Go Green” initiative has seen increased investment in solar power generation.

“Malaysian property companies are providing land and infrastructure and outsourcing solar investment to Chinese companies,” says Thomazios. “We are also seeing Malaysian coal plants retrofitting to other natural feedstock using imported technology.”

Export tariffs imposed on Chinese semiconductors also have created an opportunity to use Malaysia as an alternative route into the global market. “They create a regional HQ here, benefit from major tax exemptions, and then sell Chinese semiconductors worldwide,” Thomazios notes.

These sentiments are echoed by Thean L. Soo, a banker who had left Malaysia for Australia and worked for National Australia Bank, Westpac and ANZ before returning to Southeast Asia and becoming the managing director and head of relationship management South Asia Pacific at German lender HypoVereinsbank, a subsidiary of UniCredit.

Soo was closely involved in bringing business into Malaysia from China after the introduction of the China-Asean Free Trade Agreement in 2010, especially in high tech and green technology. He now takes a close interest in Malaysian FDI from nearby Singapore.

“After four prime ministers over five turbulent years, the investment climate in Malaysia is improving; and the new government should help,” says Soo. “There was a hiatus under [Prime Minister Mahathir bin Mohamad] and his successors … but now it will pick up again.”

He notes that platforms for inbound investments are in place, with highly structured processes: “Anybody who wants to invest will get support and guidance from the Ministry of International Trade and Industry under the finance ministry.”

Anwar’s Coalition

Prime Minister Anwar’s new unity government won power in November 2022 and, on December 16, signed a cross-party coalition agreement that gives it a two-thirds majority based on a manifesto of reform. As a result, investors will watch developments over the next year with interest.

Anwar is a former Deputy Prime Minister and Finance Minister who has signaled his intention to rewarm Malaysia’s relationships with global institutions such as the International Monetary Fund. Prime Minister Mahathir had ruled out borrowing from the IMF during the 1997 Asian financial crisis, citing its “onerous” conditions—and indeed, Malaysia recovered better than some neighbors who did accept IMF loans.

Other signs expected to be positive for business interests include a firm move to reduce social subsidies and a renewed commitment to a lagging infrastructure—especially the relaunch of the high-speed rail link between Kuala Lumpur and Singapore.

“This project is a must, and will signal that we are investing in infrastructure and enabling rapid movement between development zones in Malaysia and our prosperous neighbor Singapore,” says Mohd Nur Ismal bin Mohamed Kamal, CEO of MyHSR, the state-owned project-delivery vehicle. He is optimistic that the project, on hold since 2019, will be relaunched by Anwar’s government.

Diminished Expectations

Maybank Investment Bank estimates only moderate growth for the Malaysian economy in 2023, given challenging global conditions and slowing domestic demand. The bank cut its expectation of Malaysia’s full-year 2023 growth to a moderate 4%, down from its 2022 forecast of 8%.

Yet leaders at the central bank, Bank Negara Malaysia (BNM), are confident that the Southeast Asian nation will not enter a recession this year. “For 2023, we see some challenges to growth, especially from the external front with global growth slowing,” BNM’s governor, Nor Shamsiah Mohd Yunus, told the Malaysian National News Agency in November. “But I would like to stress again that we are not expecting a recession.”

Maybank estimates Malaysia will continue to do well with commodity exports, particularly palm oil, petroleum and liquefied natural gas. The average price of crude palm oil is expected to stay at 3,500 ringgit (about $825) per tonne (1.1 US tons). Brent crude oil is expected to stay around $96 per barrel for the following year.

China remains Malaysia’s largest foreign investor in the manufacturing sector, in addition to being Malaysia’s largest trading partner and also a significant source of tourism. Bilateral trade with China reached $176.8 billion, accounting for 18.9% of Malaysia’s total. Malaysian exports to China rose 21% to a new high in 2021,  according to the Department of Statistics Malaysia, based largely on liquified natural gas and electrical and electronic products.

Malaysia has a substantial energy sector led by state-owned Petroliam Nasional (Petronas), which manages, explores, produces, refines and markets energy resources. In late 2022, Malaysia published its National Energy Policy 2022-2040 (NEP), setting government priorities for the energy sector and announcing a shift away from hydrocarbons.

The NEP targets a 2040 energy mix of 4% bioenergy, 4% solar, 9% hydropower, 27% petroleum products, 39% natural gas and 17% coal compared to 2018 numbers of 1% bioenergy, 0% solar, 6% hydropower, 30% petroleum products, 41% natural gas and 22% coal. This modest vision has created major opportunities for inward investment in green technology.

“Malaysia has land and sunshine in abundance,” says Robert Liu. He advises on and invests in green projects in Malaysia and the region through his investment vehicle, OceanPixel, one of many local players competing with Chinese, Canadian and other inbound FDI. “We have been working with state governments to take large areas—[that are] unattractive for other investors due to the toxic legacy of tin mining and other extraction industries—and create large solar farms using imported technology.”

With the winds of change blow fresh opportunities. With neighboring rival Singapore notching new cost-of-living highs, Malaysians see a chance to build a new regional center. “Right now, there is a deliberate policy to encourage foreign investors to set up regional hubs here,” says Thomazios, also pointing to the strong legal frameworik, tax incentives and a strategic location at the heart of Asean. “We see early signs of increased FDI, and expect things will get better as we see greater political stability over 2023.”

SMEs are significant drivers of job creation and economic growth. Yet, unlike in the developed world, where they are treated as the goose that lays the golden egg, it is survival of the fittest in Africa.

African Development Bank data shows that SMEs account for up to 90% of businesses and almost 70% of employment in Africa. However, they are grappling with a $421 billion financing gap. The inability to access credit and other challenges have meant a high mortality rate for SMEs.

Frédéric Oudéa, CEO of Societe Generale, contends that for a continent full of opportunities undergoing profound changes, SMEs should not suffer a lot. “We are convinced that growth in Africa will come primarily from the private sector,” he says, adding that for this to happen, SMEs are essential.

Societe Generale wants to help Africa’s SMEs grow and prosper. With SMEs representing two-thirds of its corporate clientele, the bank has adopted multidimensional support as a critical focus of its strategy. This, coupled with its Grow with Africa initiative and the Women in Africa project, has seen the bank raise over $100 million that can be loaned to SMEs.

Over the next three years, the bank intends to double its loan book to SMEs. This stems from the understanding that these businesses represent Africa’s future in responding to the continent’s long-term challenges, particularly regarding job creation and innovation.

OCBC Bank has been recognized as the Best SME Bank in the Asia-Pacific region by Global Finance, acknowledging the bank’s outstanding support of the SME ecosystem.

It has fostered digital and sustainable financing in the region amid an increasingly challenging business environment.

The bank succeeded in opening 98% of SME accounts digitally and performed 86% of SME banking transactions digitally, and it continues to help SMEs unlock the value of their data to obtain better business outcomes.

In Singapore, OCBC has integrated business financial-management capabilities into its digital business banking platform. It allows SMEs access to a 360-degree view of their sales, expenses and cash flow trends, enabling them to identify patterns and obtain insights key to better business planning.

The bank has also launched the OCBC SME Sustainable Finance Framework to simplify access to less costly green loans to help SMEs shift toward sustainability.

It also rolled out the framework to its core markets in Malaysia, Indonesia and Hong Kong, adapting it to the relevant local certifications and standards.

Meanwhile, the bank launched the OCBC SME Index in Singapore to consistently track the pulse and performance of SMEs. Available as a quarterly report, the index helps the bank keep a laser focus on areas of growth for SMEs and know where support for them is needed.

In operation since 1941, Banreservas is the largest bank in the Dominican Republic and is the only bank with physical branches in all of the nation’s provinces. Roughly 15% of all Banreservas’ business comes from SMEs, representing $1.02 billion of the bank’s $6.95 billion portfolio.

When a government survey found that 74% of SMEs in the Dominican Republic had to cease operations during the Covid-19 pandemic, and the rest had to reduce operations, Banreservas was tapped by the Dominican government as its partner in implementing a series of emergency financial measures. In addition to issuing and administering pandemic-related loans and lines of credit. Banreservas has created a program called Fomenta Pymes (“Promote SMEs”) to integrate products, services, service channels and other benefits into this vital sector. Products and services offered include electronic payroll services, and insurance policies to protect against fire, accidents, machinery breakdowns, civil liabilities and other catastrophes. Emergency road service and towing are available for corporate vehicles. A pocket point-of-sale solution enables even the smallest businesses to accept credit and debit purchases through any iOS or Android mobile phone.  

Based in Georgia, TBC Bank won the Best SME Bank in Central and Eastern Europe award for supporting the growth and development of SMEs and for its innovation and presence in the agriculture, trade, hospitality and leisure sectors. Its efforts captured a 65% market share of newly registered Georgian businesses.

The bank’s strategy includes increased digitization, automation and distance services. In 2021, it shortened the approval process with fully automated approvals on smaller loans. For larger loans, it is automatically generating financial statements for the SME.

Digital services continue to be in high demand, with about 90% of the bank’s active legal customers using business internet or mobile banking, along with open banking so that they can check all accounts from various Georgian banks in one place. TBC implemented innovative features on its business app for automatic payments and transfers in any foreign currency. Its new Payments Space platform helps SMEs manage daily transactions and other payments.

Agriculture accounts for about 7% to 8% of Georgia’s GDP, and TBC has launched various products to support this industry. These include loans available to SMEs that produce, store, process or sell agriculture commodities, as well as working capital to startups looking to develop a farm, and payment cards to SMEs that earn income from agriculture activities. TBC also offers loans cofinanced with the Georgian Ministry of Agriculture to improve farming processes.

BTG Pactual Empresas has seen the future of banking for SMEs, and that future is digital. The Brazilian bank, formerly known as BTG+ business, now conducts virtually all its business in the digital world. Its intensive technology enables low-touch online processes, ranging from SME account applications and onboarding to disbursements and collections. These innovations have been designed to provide SMEs with a wide variety of low-cost products and services. For example, SME customers incur no monthly account fees or setup costs. Ease-of-access is also a significant SME draw: In 2022, 99% of new SME accounts were fully functional within an hour of application.

The importance of accommodating the SME market in Brazil cannot be overestimated. BTG Pactual Empresas estimates that MSMEs represent about 90% of the country’s companies and are the biggest source of job creation in the nation.

SMEs have taken note of BTG Pactual Empresas’ offerings. The bank’s SME portfolio grew 82% year-over-year from 2021 to 2022, with SME loans reaching 18.9 billion reals (about $3.6 billion), 17% of the bank’s total business for the first quarter of 2022. Special programs for rural credit, solar power and green financing, and financing for women-owned businesses make obtaining credit easier for SMEs involved in these sectors. Typical time-to-credit is only about 30 minutes. Additional offerings include insurance services, investment services, and foreign exchange services.            

With the largest network of ATMs and branches in the nation, Qatar National Bank (QNB) provides the coverage that Qatari SMEs need. It also offers a dedicated SME center in Doha that meets the requirements of small and midsize businesses. The bank currently serves more than 22,000 of the roughly 60,000 SMEs that operate in the country.

QNB offers these customers a broad array of products and services. These include working capital and trade products, commercial loans and credit cards. Working with the Qatar Development Bank, it also offers programs to finance startups that would otherwise not qualify for loans. Online and mobile capabilities enable invoice payment and other business-management tasks. Notable among these digital services is a trade portal, helping importers and exporters with QNB accounts to complete trade transactions. For retailers, QNB offers a wide range of point-of-sale solutions that can be customized to meet business requirements.

Royal Bank of Canada (RBC) has more than 1,000 branches nationwide, but traditional banking capabilities are only the start of the broad array of services offered to businesses, including SMEs. Business registration, legal help, digital transformation services, analytical insights, marketing help, e-commerce help and international trade services are all offered. So is a small-business navigator designed to help people at the earliest stages of business ownership. Ownr, an RBC Venture, is an online platform that has helped more than 55,000 entrepreneurs launch their businesses. RBC Insight Edge enables companies to leverage aggregated data to gain relevant insights into their markets, helping them attract new clients.

With offices in Spain, Portugal and the UK, Santander wins the award for Best SME Bank in Western Europe. SME clients make up over 90% of the bank’s total active corporate clients, with approximately 80% of their SME customers being digital.

In Portugal, Santander focuses on the entire value chain for SMEs with a specialized and proximity-based commercial approach. It has 22 corporate centers with over 90 corporate managers and about 300 business managers in nearly 340 branches who focus on SMEs, as well as an increasing focus on digital channels. The bank has created an ecosystem of portals, financial products, services and tools for an omnichannel experience that helps SMEs operate in an increasingly digital world.

Santander is focused on developing partnerships and offerings that meet SMEs changing needs and the challenges presented by environmental, social and governance concerns, as well as increased digitalization and globalization. The bank offers continued support to SMEs by ensuring liquidity with state aid credit facilities and providing economic support lines for Portuguese companies.

Its digitized solutions, including marketplace Santander Trade, customer-care service International Desk and global payments platform PagoNxt, have made operating across international borders easier for SMEs. Santander also offers tailored solutions to help SMEs become more efficient and sustainable by reducing energy costs.

Global Finance: How did your long experience serving SMEs help during the Covid crisis?

Eric Tham: UOB has a strong presence in Asean [the Association of Southeast Asian Nations], home to some of the world’s fastest-growing economies. With more than 80 years in the business, we have refined our experience through different economic challenges, including the 1997 Asian financial crisis, the global financial crisis in 2008 and now the Covid-19 pandemic. These first-hand experiences are now embedded in our DNA, so we are closely attuned to our clients’ needs and better able to respond to sudden crises.

GF: How did UOB manage to keep a 1.5% nonperforming loan ratio while growing its SME loan portfolio more than 10% in the past two years?

Tham: UOB kept our nonperforming loan ratio low by being very proactive in our efforts to help our clients’ businesses remain sustainable. We were the first bank in Asia to announce 3 billion Singapore dollars (about US$2.2 billion) of relief assistance to our SME clients in February 2020. We did a comprehensive portfolio review and proactively reached out to clients to understand their challenges so we could work with them on their cash flow and financing needs. We also worked closely with the Monetary Authority of Singapore in providing industrywide initiatives that helped cushion the impact of Covid-19: allowing SMEs to defer principal repayments in 2020 until September 2021.

Similar relief schemes were implemented across Malaysia, Indonesia, Thailand and Hong Kong, with UOB closely partnering with regulators in each market. The regional relief measures included moratoria and multicreditor debt-restructuring programs, some of which have been extended to 2023 and are available to our SME clients.

GF: UOB rolled out a series of targeted digitalization initiatives to help SMEs and startups across Asean. What’s next?

Lawrence Loh: We have always seen digitalization as one of the key opportunities for growth. However, the pandemic has accelerated our clients’ needs to digitalize operations and processes. This is particularly true for those with cash-heavy payment and reconciliation processes or who have bricks-and-mortar operations, as they face business disruptions caused by movement restrictions.

Digitalization initiatives are intended to connect businesses to growth opportunities, such as new streams of revenue with an e-commerce store presence, more collection and distribution channels. Our digital banking platform, UOB Infinity, enables corporate clients to manage their banking needs in a simpler and more personalized manner. For small businesses, our integrated suite of cloud-based solutions, curated under the UOB BizSmart program, enables them to boost operational efficiency and tap additional revenue streams through features such as online food-ordering capabilities and fulfillment systems. Today, 94% of our SME clients are digitally active, while the takeup of digitalization offerings from April 2020 to March 2021 jumped sixfold.

GF: How is technology impacting the design of SME products?

Loh: As one example, UOB BizMerchant is a small-ticket financing solution for online businesses operating on e-commerce platforms. We redesigned our credit-underwriting engine by applying analytics to new pools of data to gain deeper insights into the credit behavior of small businesses operating through our e-commerce partners, including Lazada, Sendo, Shopee and Qoo10. In 2020, more than 550 SMEs in Vietnam benefited from UOB BizMerchant, with a total loan size of 100 million Vietnamese dongs [US$4,400]. UOB also has a 30% market share of e-commerce lending in Ho Chi Minh City.

GF: What future plans to serve the SME market can you share?

Tham: Asean expects to grow to $6.6 trillion by 2030, giving rise to business opportunities for those ready to navigate the diversity within the region. We connect businesses through regional trade corridors within Asean, and between Asean and China. As a strategic partner to our customers, we place them at the forefront of growth opportunities, extending support beyond their financing needs to include areas such as digitalization and sustainability.

Small and medium enterprises (SMEs) are the backbone of the global economy. According to data from the World Bank, they represent approximately 90% of businesses worldwide, employ more than half the global workforce, and contribute about 40% to GDP. And the onset of Covid-19 hit SMEs hard, forcing them to reduce or cease operations.

Since the pandemic’s start, SMEs have turned to their governments and banking partners to help shepherd them through this period of unprecedented supply chain disruptions, liquidity crunch and labor shortages.

Simply surviving the pandemic will prove challenging for SMEs in developed, emerging and frontier economies. For example, the share of SMEs in developed markets that have negative equity rose by 6% between 2020 and 2021, threatening up to one in 10 SME jobs in those economies, according to the authors of an International Monetary Fund (IMF) discussion note Insolvency Prospects Among Small and Medium Enterprises in Advanced Economies: Assessment and Policy Options.

“This increase is similar to that seen in the five years after the global financial crisis, but it would occur over a much shorter period,” write the authors. “In a downside scenario with extended lockdowns and persistently weaker demand, the share of insolvent SMEs would rise by eight percentage points.”

In response, governments have responded by intervening in terms of loans, credit guarantees, payment moratoria and asset purchases, adding up to 11% of GDP by October 2020, IMF staff have estimated.

However, government funds are not limitless. As a result, countries face turning the stimulus tap off, or down severely, while trying to avoid a liquidity crisis among SMEs and aid their continued recovery.

Girding for a Tough Recovery

Financial access is a crucial constraint to SME growth and is the second-biggest obstacle facing SMEs in the emerging and frontier economies, note researchers from the World Bank. Nearly 65 million SMEs, or 40% of micro, small and medium enterprises (MSMEs) in developing markets, face $5.2 trillion in unmet finance needs, note the researchers, citing a 2017 study by the International Finance Corporation. Businesses in the Asia Pacific region represent the largest portion of the gap (46%), followed by Latin America and the Caribbean (23%) and Central Asia (15%).

Throughout the pandemic, SMEs have taken several approaches to rein in their labor costs. Of the more than 2,500 SME owners worldwide surveyed by Harris Poll for Salesforces fifth annual Small and Medium Business Trends report, 43% offered flexible working arrangements, 35% reduced employee hours, 19% furloughed employees, 14% gave employees a zero-hour schedule and 12% laid off staff. On the bright side, 12% of those polled expanded employee benefits while the majority (58%) did not alter them. Moreover, only 29% of the respondents chose to reduce them.

Returning SMEs to their pre-pandemic health should not be the goal for governments and financial institutions. SMEs will need to generate 600 million new jobs by 2030 to absorb the growing global workforce. “Building back better” is not an option but a necessity.

The editors of Global Finance, with input from industry analysts, corporate executives and technology experts, selected the winners for the World’s Best SME Banks 2022 based on a set of objective and subjective factors. Editors consulted entries submitted by the banks as well as  the results of independent research. Entries were not required.

Judges considered performance from April 1, 2020, to March 31, 2021. Global Finance then applied a proprietary algorithm to shorten the list of contenders and arrive at a numerical score up to 100. The algorithm weights a range of criteria for relative importance, including knowledge of SME markets and their needs, breadth of products and services, market standing, and innovation.

Once the judges narrowed the field, they examined the final criteria, including the scope of global coverage, size and experience of staff, customer service, risk management, range of products and services, execution skills and use of technology. In the case of a tie, the judges lean toward local providers rather than global institutions. The panel also tends to favor private-sector banks over government-owned institutions. The winners are those banks and providers that best serve the specialized needs of SMEs.

Under the high-stress conditions of pandemic, Singapore-headquartered United Overseas Bank (UOB) stepped up, earning accolades as the Global Finance Best SME Bank in the World 2022, for its support of its SME clients during these tumultuous times.

With more than 80 years of history, UOB leveraged the lessons it learned from navigating the Asian financial crisis of 1997 and the global financial crisis of 2008. The bank began pandemic relief in February 2020 when it announced S$ 3 billion (US $2.2 billion) in relief assistance for its SME clients.

From December 2019 through June 2021, the bank also increased its gross loan portfolio to S$299 billion from S$269 billion, an 11% increase. It maintained a nonperforming loan ratio at 1.5%. Loans to SMEs represent 14% of the bank’s gross loan portfolio, while loans to large corporates and personal loans represent 53% and 33% of the portfolio, respectively.

Digital technology is key. “We have always seen digitalization as one of the key opportunities for growth,” says Group Commercial Banking head Eric Tham. “However, the pandemic accelerated our clients’ needs to digitalize operations and processes, especially in the last 18 months … The takeup of digitalization offerings from April 2020 to March 2021 jumped sixfold compared with a year earlier.”

UOB also offers SME clients digital tools to improve operational efficiency, such as the bank’s BizSmart program—a suite of cloud-based applications that handle back-office processes like payroll, accounting, inventory and resourcing. BizSmart also lets clients access a direct feed to their operating accounts, permitting reconciliation with a click of a mouse.

FNB is Africa’s SME bank of the year and is recognized for its notable innovation and handling of finance products and credit repayment modalities for SMEs across its sub-Saharan Africa portfolio.

The bank has operations in South Africa, Botswana, Namibia, Eswatini, Lesotho, Mozambique, Ghana, Tanzania and Zambia.

FNB is also recognized for offering needed relief, and enhancing capacity for SME companies in its markets, in the context of pandemic-induced difficulties.

During the period under review, FNB initiated Covid-19 relief programs in Namibia and Botswana. For Botswana, this was in addition to investing in Wi-Fi boosters for its Cash Plus agents, most of whom are SMEs. The bank also launched Mogwebi, an insurance program for SMEs, and “installment relief for SME customers’ commercial property finance, vehicle and asset finance and term loans.”

FNB also started allowing SME customers to apply for loans via its Ghanaian digital platforms. Collateral challenges still dog entrepreneurs across Africa; FNB Namibia partnered with the Development Bank of Namibia on a risk-sharing initiative aimed at alleviating these constraints.

In its largest market, South Africa, FNB offers a toolkit that assists businesses coping with Covid-19, as well as accounting, invoicing and payroll support.

Singapore-based United Overseas Bank (UOB) wins as the Best SME Bank in Asia Pacific 2022 for its imaginative support of SMEs during the pandemic. UOB has broadened its range of solutions and services, aggressively pursued digital transformation and focused on maximizing cross-border SME services. The bank notably saved many SMEs during the crisis by leveraging its long-term experience of serving smaller clients in Asia to understand their needs and their vulnerabilities.

In the past year and a half, UOB’s gross loans grew by 11%, to 299 billion Singapore dollars (about US $222 billion) by June 2021. Despite this aggressive portfolio growth, UOB’s nonperforming loan ratio remained stable at 1.5%. SME loans compose 14% of the bank’s total loan portfolio.

UOB rolled out a series of targeted initiatives, including digitalization strategies and solutions to immediate business challenges, to help established firms and startups across Asean. In addition, the bank made financing more accessible to small businesses via a data-analytics-powered credit underwriting engine, ensuring that quarantine rules did not hamper support.

Although government support has played a key role in supporting SMEs during Covid-19, creative support from banking partners has been critical. UOB has been a luminary in this area.

During a year in which 74% of surveyed local companies closed due to the Covid-19 pandemic and 26% of companies partially shut their doors, the Dominican Republic’s Banreservas acted as a role model for other regional banks, winning the inaugural title of Best SME Bank in the Caribbean through financial relief—working with the national government and leveraging the bank’s digital strategy and overall support for its SME clientele.

The bank works with the government and Fiduciaria Reservas in an initiative to let SMEs accelerate payment of invoices to companies that supply goods and services to the Dominican state.

To enable easier access to governmental relief measures, Banreservas also developed and deployed a new digital product based on existing client-card identification numbers augmented with new unique PIN numbers. More than 700,000 households could use these with point-of-sale systems at approximately 4,400 groceries, warehouses and department stores, without using a physical card.

The bank also held multiple loan fairs for micro, small and midsize enterprises (MSMEs) throughout the pandemic, in which the bank provided more than 4,400 loans totaling approximately $190 million in capital borrowed.

Operating throughout Central America, BAC Credomatic earned the title of Best SME Bank in Central America for its digitalization strategy, pandemic-related financial relief and financial education offerings.

Well along its digitalization road map before the global outbreak of Covid-19, the bank prioritized further digitalization to eliminate physical interactions where it could. It leveraged its existing investments in WhatsApp, webchats and chatbots to improve client self-service capabilities, which decreased call volumes—by 30% in Panama, for example—and resulted in 90% of all customer interactions and 60% of all monetary transactions happening digitally.

In Costa Rica, within the first few months of the pandemic, BAC Credomatic offered corporate clients bespoke relief packages and provided SMEs an option to delay payments for two months. The bank has administered programs that empower SMEs, provide financial education and push for further social responsibility. In Panama, BAC Credomatic has run similar programs and funded organizations for Covid-19 victim relief, as well as enacting financial education programs for women.

The OTP Bank Group takes this year’s prize for Best SME Bank in Central and Eastern Europe (CEE). The bank has maintained its role as a strategically important player in this region; and through its products and technology, it has helped small businesses in the region to grow.

The bank has been expanding its international footprint through both organic growth and successful acquisitions to become the fourth-largest banking group in CEE. Currently, OTP Bank operates in 11 countries via its subsidiaries. It is the market leader in Hungary, Bulgaria, Serbia and Montenegro and a top-five local bank in Croatia, Slovenia, Albania and Moldova. The bank serves 18 million customers through 1,750 branches in the various regional markets. The bank also specializes in important industries in these regions, such as agriculture, trade, food and renewable energy.

OTP Bank offers a wide range of products to the SME segment in these countries, including working capital and investment. The bank has digitized its platforms to offer SMEs online banking services, as well as electronic invoicing and cash flow reports. The bank has also focused on developing a new internet bank and reengineered its loan processes to better serve its customers.

Banco do Brasil is Brazil’s oldest bank and the second largest by assets in Latin America. In the SME realm, it has 12% of the domestic market—representing 2.6 million companies and 17% of the bank’s total business. Banco do Brasil serves SMEs with 7,000 service professionals, 215 SME-exclusive branches, 1,701 retail branches with dedicated SME services, and nearly 5,000 specialized service points. It also offers SMEs 396 business platforms and 449 entrepreneurial hubs.

Covid-19 support included $22.4 billion in loans to this borrower segment, benefitting roughly 395,000 clients. Loans provided working capital, payroll financing, advances on receivables and more. Loan extensions and grace periods were also offered.

Technology plays a significant role in Banco do Brasil’s operations, and never more than during the pandemic. Installment extension requests were processed via the bank’s Digital PJ mobile app, which in 2020 processed more than 1.05 billion transactions and interactions. These included consultations, chats and loan applications. In addition, the bank debuted technologies that enable microenterprises to open checking accounts digitally and access services including automatic deposits, withdrawals and cash transfers. Finally, the bank partners with the nonprofit Brazilian Micro and Small Business Support Service business-development organization to engender a sustainable environment for Brazilian SMEs and microenterprises.

Emirates NBD bills itself as the leading banking group in the Middle East and North Africa. It has an SME market share of 24% in the United Arab Emirates (UAE), with approximately 65,500 SME accounts. SME products and services are provided throughout its 68 branches, including seven key business banking centers. The bank’s 100 SME business relationship managers offer SME customers a broad array of accounts, along with cash management, asset management, wealth management and trade finance services.

Emirates NBD has also built the E20. digital business bank specifically to grow market share by better supporting small-business customers through digital technology. A particular target of E20. is the more than 100,000 UAE microbusinesses that often go unserved because of minimum bank balance requirements. E20. enables SME customers to start, manage and expand their businesses. A small-business resource center is available, as are tools for accounting, cash flow, expense management, payroll, invoicing and collections. Analytics provide SMEs with insight into their customers and stakeholders.

The Royal Bank of Canada (RBC) earned the title of Best SME Bank in North America for its service and support of business banking clients throughout a truly turbulent 2020 and 2021. The bank partnered with the Canadian government’s various programs, such as the Business Development of Canada Co-Lending Program, Canada Emergency Wage Subsidy, and the Highly Affected Sectors Credit Availability Program, as well as RBC’s own Client Relief Program, to provide businesses with much-needed emergency liquidity. The bank’s investment in advanced technologies like machine learning also paid off.

RBC additionally took steps to support cultural entrepreneurs through its launch of its RBCxMusic initiatives, which provided stipends and promotional support for early-career musicians and recording artists.

Barclays is named Best SME Bank in Western Europe. With £1.3 trillion (about $1.8 trillion) in total assets as of the 2020 annual report, it’s one of the largest foreign banks operating in continental Europe. The UK-based bank has created a £14 billion new lending fund to support SMEs and offers a range of services, including clinics and webinars, to help SMEs manage their operations. Barclays also has partnerships with a variety of vendors that provide SMEs with services like pensions and asset finance.

As SMEs have struggled with the pandemic, the Back to Business program, sponsored by Barclays in partnership with Cambridge University’s Judge Business School, opened to SMEs regardless of whether they have a preexisting relationship with the bank.

The bank supports startups through an accelerator program focusing on fintechs. Recently, the bank also established Eagle Labs to help entrepreneurs scale and grow their startups. By working with Barclays experts, these startups become better equipped to stimulate local economies.

Barclays has had a presence throughout Western Europe for about a century and provides support to SMEs in these countries. SMEs can take advantage of some advisory and accelerator programs and access other SME services such as financing opportunities.