Roland Berger Strategy Consultants has analyzed the role of banks in the internationalization of European small and medium enterprises in its new study: "What role can banks play in the internationalization process of European SMEs?". According to the results of the study, it is essential for the economies in European countries today, that banks strengthen their system of support for SMEs internationally. That is, because internationalized SMEs create more jobs than those only focused on domestic markets. Roland Berger estimates that up to 600.000 jobs could be created in Europe in the next 5 years as the result of a full financial support to European SMEs' internationalization.
Strong growth and employment potential linked to the internationalization of SMEs
Internationalization of small and medium businesses can take different forms: importing raw materials or intermediate products, exporting finished products, foreign direct investment, subcontracting, etc. Beyond their role as engines of innovation, internationalized SMEs create a lot more jobs than purely local SMEs: there is 7% annual growth in the number of jobs at internationalized SMEs, versus 1% for others. "So internationalization is a key lever for reversing the unemployment trend," says Cécile André, Partner at Roland Berger Strategy Consultants. French SMEs for example lag behind in this area; just 31% have any international activities, compared to 44% on average in the European Union.
Bank finance, pillar of internationalization at SMEs
Historically, banks have offered a broad range of financial products and services to assist small and medium enterprises in their internationalization. Among the products used by SMEs are trade finance products (payment guarantees made by foreign players), risk hedging (particularly exchange rates), cash management, international payments (managing international accounts) and advice on development and partnerships.
European banks need to improve their offerings and geographical coverage
Since the financial crisis of 2009, banks have tended to focus their activities on domestic segments and markets. They have thus scaled back their international networks. To once again support the internationalization of SMEs, banks in Europe should realign their offerings and geographical coverage.
"Banks should first differentiate their international financial products. They all propose uniform offerings, not allowing SMEs to find a tailored financial product or service that stands out", says Cécile André. Further they should optimize their organizational model to reconcile international offerings and local support for customers. At the end they should also put in place steering systems to coordinate the segments and geographical areas with regard to SMEs.
