Chapter 23: Bank products for SME Sector

Question 1

Small and Medium-size enterprises

Answer 1

Usually supply goods/services to the local market and use standardized bank products:
* Current account
* Business savings account
* Deposit account

Question 2

Current Account

Answer 2

Bank account for a retail customer/business, used to make payments/receive payments
* Business current account fluctuates considerably
* IR on the positive balance is variable and often low, funds can be withdrawn at any time

Question 3

Business Savings Account

Answer 3

• last few years, IR is zero or negative for business savings accounts but this is unusual, generally provides positive yield curve
• Business can earn return on the business savings account, IR will depend on the withdrawal conditions / size of balance

Question 4

Deposit account

Answer 4

• Most well-known product on the money market
• Money only becomes available again after agreed term
• Bank pays higher IR for depsoit account than for current or savings account
• Minimum is usually 10,000, and shortest period is usuallly two weeks. rarely longer than a few months

Question 5

Types of deposit accounts

Answer 5

• Fixed-Term Deposit account - single lump sum is deposited, set IR and term
• Flexible deposit account - interim withdrawals and deposits are possible. Lower IR. Minimum balance needed to keep certain IRs.
• Special-purpose - Short term (up to six months) for a special purpose, e.g. real estate.