(SINGAPORE) Small and medium enterprises (SMEs) are a hot group of targets for the private sector right now, going by a recent spate of activities.

In the last two weeks, there have been at least four SME-related marketing campaigns, all aimed at identifying noteworthy enterprises and building rapport.

Just last week, HSBC and credit information provider DP Information Group (DP Info) announced the winners of the SME Growth Excellence Awards, while KPMG, OCBC Bank and The Business Times launched the nominations for the 14th Enterprise 50 awards.

Before those, Standard Chartered Bank and credit information provider Dun & Bradstreet introduced a new list of Top 100 SMEs rankings, and the first batch of recipients of the Emerging Enterprise Awards by OCBC and The Business Times was announced.

Organisers said such awards reflect the growing importance of the role that SMEs are playing in the economy.

'We believe that when these enterprises reach a certain stage of development, greater recognition and public exposure should be accorded,' said KPMG's managing partner for Singapore, Danny Teoh. 'This can help them excel, taking them to the next level, and may take the form of a merger or acquisition, investment by private equity firms, or even an initial public offer (IPO). The number of awards targeted at these enterprises reflects the recognition of this growing importance by the local business community.'

The drive to nurture and encourage the SME sector has largely been initiated by the government in the past. But with SMEs becoming potential business sources, private-sector services providers are allocating more resources to track them, as well as to build relationships with the top honchos at such firms.

And it's not just the bigger SMEs they are eyeing. Even those with less than $15 million in fixed assets and/or less than $10 million in turnover are on their radar screens.

Banks and credit services providers see potential in establishing contacts early, so that as the businesses expand, they would be in the minds of the entrepreneurs - should new types of risk management services or financial solutions be required.

'As our SME customers go through different stages of growth, our relationship managers also grow with them and learn to understand their needs and business well,' said OCBC head of emerging business Tan Chor Sen. 'When the SMEs reach a certain growth stage where they have more complex needs, we are able to offer customised financing solutions, ranging from quasi-capital, syndicated loan, bond facilities to rights issues, to help them maximise their growth opportunities - for example, providing lead- managing and underwriting services to SMEs that have IPO listing plans.'

The services providers are seemingly undaunted by the risks involved in engaging smaller SMEs with low turnover or little track record.

'By working with them early on in their growth stage we can advise them on how to expand their business and move to venture overseas without taking unnecessary risks, thus making the best use of their resources,' said HSBC Singapore head of commercial banking Tan Siew Meng. 'Our approach is to understand each business and work with them as partners.... That way, we know our clients' business is well managed, which helps us to reduce possible risks.'

On top of awards, there are also noticeably more surveys - such as the annual SME Development Survey by DP Info and the UPS Asia Business Monitor - watching the sector. Last month, Sirius Venture Consulting launched a $30 million SME fund to invest in 10-12 firms in the growth and expansion stage.

Such positive sentiment for SMEs is set against a backdrop of a rising number of young bankrupts and forced business closures. In The Business Times report last week, credit analysis firm Amequity Pte Ltd noted that 42 per cent of those who went bankrupt in the first four months of this year were under 40, up from 34 per cent last year. Many are entrepreneurs struggling to cope with higher business costs.

In addition, the latest available data from the Insolvency and Public Trustee's Office showed that the number of petitions filed for compulsory liquidation rose 41.7 per cent year-on-year to 17 in March. This is a 55.5 per cent increase from 11 in February. The number of companies wound up in March also increased 83.3 per cent year-on-year to 11, up from six in February.

The fact that SMEs form the bulk of the Singapore economy makes them hard to ignore. Depending on which definition one applies, there are about 150,000 to 300,000 SMEs in Singapore, not counting the new start-ups formed each day. Banks, especially, are churning out a plethora of offerings catering to a diverse group that may consist of small retail outfits, emerging growth companies, and industrial firms. Rather than being mere services providers, banks now want to be regarded as partners, especially in their overseas expansion.

'They (SMEs) contribute 42 per cent of Singapore's GDP and employ more than half the Singapore workforce,' said Stanchart SME Banking general manager Kavita Bedi. 'With this trend, both the government and private institutions are looking to help our SMEs become the larger corporates of tomorrow.'

This article was first published in The Business Times on Jun 2, 2008

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