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Freeman, I 2011, 'Seeking synergy in SME financing: an examination of the dichotomy affecting banks and the needs of small-to-medium business enterprises (SMEs) in the Australian business banking context', DBA thesis, Southern Cross University, Lismore, NSW.

Copyright I Freeman 2011


This research sets out to test the proposal that if business banks were to adopt a business development process focussed upon assisting SME customers rather than concentrating upon their own ROIs and stock prices, both parties would experience significantly enhanced business outcomes in both the short and long terms.

The literature review indicates that for hundreds of years, banking and financial services industries have regarded ‘success’ quite differently from their customers. In a simplistic sense, banks tend to view money as a commodity which, if handled prudently and efficiently, produces a high level of return on investment (ROI) leading directly to strong stock prices. Customers however, tend to view money as a fuel that powers creative developments designed to produce profitable solutions to problems as they become evident in the marketplace.

In this thesis, ‘Seeking Synergy in SME Financing’ the literature review further suggests that in the Australian business banking context, banks typically look inwards towards efficiency, while SMEs look outward towards elucidation. Banks claim that the strong demand for their products, together with resultant high profits, confirm that their profferings of products and services are wholly justified. SMEs, conversely, claim banks have little or no generic understanding of either business per se or how to design products and services aimed at meeting business needs.

Qualitative action research was undertaken in order to gain an understanding of the real needs of SMEs through a series of reflective steps with a view to creating an innovative paradigm capable of benefiting both banks and SMEs.

In the first stage a snowballing process was used to gain an insight into the goods and services being sought by SMEs. Once saturation was gained, the topics of concern were distilled until 16 issues of most concern were isolated.

These issues were then subjected to the scrutiny of 45 SME owners or operators, each of whom (a) prioritised them in order of importance (b) estimated the level of service experience they had experienced in dealing with each issue using a five-point Likert scale and (c) added a personal comment on each one.

The participants’ responses for the top five issues were then arranged according to the following categories: the banks they used, their genders, the size of the businesses they operated and the nature of the businesses they operated. The responses were analysed to see if any of these categories influenced the customers’ responses. At the same time, bankers from two of the ‘Big-4’ banks (referred to as Bank 1 and Bank 2) were asked to forecast the levels of satisfaction SME customers might record. This first stage showed a marked disparity between the expectations of the bankers and the ratings by the SME operators.

In line with the ‘Unfreeze-Change-Freeze’ structure dictated by action research methodology, after reflecting upon the outcome of stage one, a research paradigm was developed for a 10-week assessment in the field. This assessment was entitled the ‘Incubator’ programme. Within this programme, a process, entitled the ‘VALUE Approach’, allowed bankers to ask open questions about their SME customers’ businesses and/or industries but excluded them from attempting to make any transactional sales. The Incubator programme was adopted and activated by the bankers within a particular ‘Bank 1’ Business Banking Centre (BBC). Bank 1 regarded ‘the achievement of success’ as being a 20 per cent increase of income to the bank.

A total of 17 bankers was educated in the operation of the Incubator programme and then asked to make a series of introductory telephone calls to be followed with either VALUE telephone calls or VALUE meetings with SME customers. Any additional income resulting from their participation in the programme was evaluated on a weekly basis. Allocation of funds to either traditional or Incubator programmes was carried out by team discussion in order to eliminate possible researcher bias.

At the end of the 10 week programme, new income attributed to the new paradigm was assessed and found to be considerably in advance of the 20 per cent increase levelled by Bank 1 as its measure of success.

In order to assess attitudinal change, 15 SME customers (five per team) who had been subjected to the new approach were asked by Bank 1 to (a) evaluate the level of service experienced via the same five-point Likert scale used earlier in the research and (b) to make a personal comment.

The outcomes showed a strong positive change in attitude towards the bank by these SME customers. Furthermore, while the Incubator programme did not run for long enough to gauge loyalty, the figures emanating from the programme indicated satisfaction levels had reached a point that strongly indicated the generation of ‘loyalty’.

The significance of these findings is that, in spite of generally very low levels of SME customer satisfaction regarding business banks, a new paradigm focussing upon customer needs rather than efficiency-based bank profits, led to significantly enhanced outcomes for both parties.