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Value Chains as Drivers of Sustainable Development

Value Chains as Drivers of Sustainable Development

  • Januário Valente Júnior • Head of the Commercial Segment of the Retail Banking and Business Division of Absa Bank Moçambique

In recent times, banking has increasingly become a business partner and not just a service provider, presenting “out of the box” solutions, duly customized, adjusted to the needs of each client.

To respond to this paradigm shift, commercial banks have begun to invest in knowledge of the customer’s entire production chain and in a more relational and less transactional approach. This model gives a competitive advantage when the objective is to be the preferred bank, serving the business cycle, trying in this way to mitigate the risks inherent to its operation, due to the lack of information necessary for a conventional risk analysis.

This new relational model that we have been following in national commercial banking poses new challenges to the sector, forcing it to provide expertise and present alternative solutions, abandoning completely the “one size fits all” concept, demonstrating its capacity to serve the market more and better, with structured and personalised financial solutions that support the value chain in a transversal manner.

However, within Small and Medium Sized Enterprises (SMEs), integral parts of the value chain of large multinationals, access to finance continues to be a matter of debate, where the lack of objective, credible and transparent information makes risk and credit analysis by commercial banks a constant challenge. To respond to this, it becomes imperative and urgent to explore alternatives that allow not only to capitalise on a set of opportunities that may arise within the current scenario of constant changes and uncertainties, but also the need for triangulation, as if it were a “master key”, in order to reduce the associated risks when analysing an already established or growing SME in isolation. To get around this situation, one of the alternatives is for banks, in general, to look at risk in a broader and more global manner, analysing opportunities for the transfer of risk between the various participants in the Value Chain.

“It is urgent that these SMEs, which are part of the value chains of large multinationals, can empower themselves to respond to global demands, and here I am referring to compliance with the SDGs and the acquisition of certifications…”

Also, analysed from the same perspective, the assessment of credit risk is facilitated by the simple fact that there is certainty about the source of payment, there is even, to some extent, a comfort and thus a more simplified analysis of the financial capacity of a particular company. Nevertheless, it is still fundamental to encourage SMEs to invest in their capacity building. Currently, the existence of incubators and/or accelerators, which allow these companies to have access to financial literacy, becomes absolutely necessary as a lever to operate in a competitive and globalized market and thus achieve the much desired business growth.

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It is also important to mention the equal need for SMEs to invest in innovation, adopting new technologies in their business, putting them under financial pressure, where emphasis is given to the role of banking in the design of appropriate value proposals, making room for the creation of strategic partnerships with and between companies from other sectors.

Additionally, it is equally urgent that these SMEs, which are part of the value chain of large multinationals, are quickly empowered to respond to global demands, and here I refer to compliance with the Sustainable Development Goals and the acquisition of certifications so that they can compete on an “equal footing” with global companies setting up locally.

In short, in this panorama it is necessary to have a 360º vision of business, where we do not only look at the business of large companies, but also at their value chain as a whole, from clients to suppliers and consequently to their spin-offs, so that all may contribute to the sustainable development of the local business fabric in its different dimensions.

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