Success Stories

FMI: Financial Operations and Restructuring (FOR-Jordan)

Program Overview
FMI was invited to Jordan to assist SMEs to overcome obstacles to accessing capital. The most important problem was information asymmetry – SMEs lacked the ability to provide banks/investors with standardized financial information, and they also lacked the basic financial skill sets to communicate effectively with bankers/investors. The challenge to FMI was to come up with a user-friendly software program and training methodology that could assist SMEs in producing standardized financial data for presentations to bankers/investors.

Thus, the FOR-Jordan project was created by FMI, with the support of key Jordanian partners, to stimulate increased capital and credit to SMEs to enable them to expand their businesses, increase profitability, and generate new employment opportunities. FOR-Jordan is the first development program in the Middle East to address specifically the problem of SME financial information constraints, and the only one to develop successfully a common financial language to bridge the gap between (SMEs) and commercial banks.    

Content
FOR-Jordan initially concentrated on educating and training SMEs in financial management, using a patented software program that enabled users to easily input financial information to produce income statements, balance sheets, and financial ratios. The project methodology consisted of instruction in financial concepts, introduction to the software, and education on how to present financial information to bankers/investors.

At the same time, FOR-Jordan reached out to the Jordanian banks and investors to understand their constraints to providing capital to SMEs. The answers were instructive. Bankers need:

•  Standardized financial information and documentation
• The ability to quickly and efficiently "prospect" for SME clients
• The ability to analyze the cash flow of a SME and to assess credit-worthiness
• The ability to project business results and monitor performance against agreed upon benchmarks (covenants)
• The ability to assign risk ratings according to international standards
• A reliable credit scoring system to lend profitability to good customers.

Work Both Sides of the Street
Banks and SMEs must communicate effectively to facilitate mutually profitable lending. FMI recognized that its program had to encompass the banks, and began working with Jordanian bankers to modify its software and training methodology to accommodate their needs. In 2005-2006, FMI trained about 350 SMEs on its basic software package (Business evaluator), while beginning research and development on a new, more banker-friendly version.

In December 2006, FMI successfully transferred management of FOR-Jordan to the Business Development Center (BDC) in Amman. In January 2007, FMI introduced a more powerful software program that goes beyond the basic Business Evaluator (income statements and balance sheets) of the first generation software. The new features include Credit Risk Scoring, Financial Projections, What If (for alternative business scenario analysis), Risk Management, and improved graphics. FMI signed a technology agreement with the BDC, which allows it to use the software to train SMEs in Jordan.

Accomplishments
FMI’s FOR-Jordan project demonstrates that solving the information and financial language gap can overcome the obstacles to lack of access to capital and credit by SMEs. Alumni of the FOR-Jordan project reported $10 million in financing as a direct result of the interactive software program and the training in financial concepts they received. FMI is currently working with Jordanian banks in a pilot project to test the software prior to its release to the commercial market. Moreover, the FOR-Jordan continues forward in its training mission, under highly capable Jordanian management.

 Jordanian government officials have publicly congratulated FMI for its FOR-Jordan initiative and its development of the software. These are supportive of Jordan’s national development plan, including:

•  Business Development (increases in profitability of SMEs, employment generation)
• Enterprise Competitiveness (enhancing Jordan’s trade prospects)
• Capital Mobilization (financial intermediation, increased investment)
• Human Resource Development (financial analysis capacity)

 Acknowledgements

Financial Markets International (FMI) was directly responsible for the management of FOR-Jordan from September 2004 to December 31, 2006.  Funding for SME training was provided by the U.S. Middle East Partnership Initiative (MEPI) of the U.S. State Department.  FMI’s active local partners were the Business Development Center (BDC), the Jordanian Loan Guarantee Corporation (JLGC), and the National Fund for Enterprise Support (NAFES) of Jordan. FMI also benefited from the advice of numerous Jordanian bankers.   

For more on FMI’s FOR-Jordan project click here.

For additional information go to www.forjordan.org.