Quick Reactions to “Start-ups can’t bank on support” (ST Forum, 14 Aug 2013)

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Mr Deepak G. Gurnani sits on the board of an innovation company that has been supported by various government agencies since its inception nearly five years ago. From what I know, the company has been awarded many grants, won many international accolades, assembled a great team and enlisted a strong line-up of directors/advisers.

Yet as recounted by Mr Gurnani in the letter,

Now on the verge of manufacturing and marketing a revolutionary home-appliance product, we approached one of the “big three” local banks for a letter of credit facility for importing equipment from China worth $250,000.

We were shocked to be rejected outright by the bank, with which we had cultivated a relationship for a couple of years, unless we paid a 100 per cent margin for the letter of credit.

I can understand if there is any deficit or credit risk to the bank. But we have been deemed financially sound, and were rejected merely because we did not have a “mandatory three-year track record”. The bank even discouraged us from seeking similar facilities from other banks as it was an “across-the-board MAS (Monetary Authority of Singapore) rule”.

The comments by Mr Deepak G. Gurnani, a 52- year old Singapore citizen and a seasoned entrepreneur with 38 successful years of experience in various industries ranging from lifestyle to technology hit the nail on the inadequacies of our financial system.

You will note that we thoroughly share the views of Mr Deepak G. Gurnani. We’ve elaborated his observations earlier in these posts (click them to read):

Mr Deepak G. Gurnani further laments:

Sadly, we are beginning to realise the toll exacted by the limitations and myopic view of enterprise-loving but innovation-baulking banking practices here.

We fully agree. And we are motivated to address the inadequacies that stifle entrepreneurial spirits!

We believe the banks’ traditional ways to ascertain a borrower’s trustworthiness, while methodical, is mechanical and incomplete. Mainly, they ignore opportunities to further expand and value a borrower’s holistic reputation through their achievements and community presence.

We believe the barriers in our current system, structurally favor the “big boys” and prejudice SMEs, who incidentally “make up 99% of enterprises, employ 70% of the workforce and contribute more than 50% of Singapore’s GDP.” (quoted from a speech by Minister of State for Trade and Industry, Mr Teo Ser Luck). Mr Deepak G. Gurnani, we are equally perplexed at the irony of the situation!

Peer lending offers an alternative route of capital allocation to make the financial system more equitable and participative for everyone, which we believe can be a solution to the problem. (please read Making Sense of P2P Lending)

I did not know Mr Deepak G. Gurnani but I thank him for lending a credible voice to flesh out these inadequacies!