SME Handbook Vol - 1

Limit of Liability/Disclaimer of Warranty: While we have diligently prepared
the SME Handbook to provide valuable guidance to the reader, we do not

guarantee the accuracy or completeness of its contents and expressly dissclaim
any implied warranties or fitness for a particular purpose.
Copyright © 2023 by Business Center Corporation

All rights reserved. No part of this book may be reproduced in any manner
without the express written consent of Business Center Corporation, except in
the case of brief excerpts, reviews or articles. All inquiries should be addressed to
Business Center Corporation, M. Kaneeru Villa, First Floor (A), Orchid Magu, Male,
20212, Maldives
Email: info@bcc.mv
Telephone: +960 330 5555
All publications of the SME Handbook are freely available to the public at
https://bcc.mv/
ISBN: 978-99915-57-42-7
The information in this book is up to date as of 10 August 2023

Preface
The SME Handbook is your guide to finding opportunities and
overcoming challenges as an SME. This handbook is written to assist
you from the start of your SME to managing stakeholders and day-
to-day activities. Walking the road to success is no simple task
for any business. Hence, this handbook will cover the necessary
processes, planning tools, and practical approaches that are
commonly used by SMEs to further their progress in this field.
The explanation of the essential tools and processes for an SME can
be quite long. As such, the SME Book will be split between multiple
volumes for your convenience. This book is the first volume of the
SME Book, which will focus on providing an overview of SMEs, the
registration process, obtaining finance, and strategic & business
planning.
The SME Handbook is an initiative of the Ministry of Economic

Development and is authored by Business Center Corporation
(BCC) in collaboration with the United Nations Development
Programme (UNDP) in the Maldives with the generous contribution
of the Government of Japan. This handbook is a testament to their
commitment to supporting the growth and development of SMEs in
Maldives.
About BCC
Business Center Corporation (BCC) is the implementing body of
MSME development projects initiated by the Ministry of Economic
Development. The organization was incorporated in 2017 by
presidential decree with the purpose of enabling a competitive
and innovative MSME developmental environment. As such, the
main objective of BCC is to create this developmental environment
for MSMEs through various support mechanisms that allows these
businesses to sustain, scale, and grow.
Mission Statement of BCC

Foster, support, & promote inclusive economic
growth through the provision of a full range
of business services to support Micro, Small, &
Medium Enterprises.
Vision of BCC
Create an enabling and inclusive economy of
competitive, innovative, and sustainable MSMEs
with access to infrastructure, assistance, and
global opportunities to thrive in.
SME Handbook | Volume 1

Role of BCC
BCC provides numerous services and undertakes various
functions in its progress towards the development of its
organizational objectives.
Consulting & Advisory Services

Lack of business knowledge is a significant obstacle
faced by entrepreneurs when starting and operating a
business. To address this, BCC offers expert consulting
and advisory services. Our experienced professionals
provide valuable guidance and strategic advice to
businesses, helping them make informed decisions,
identify new opportunities, and overcome challenges.
Through our consultation services, we aim to enhance
the performance and success of MSMEs.
Access to Finance
Access to finance is a major hurdle for many aspiring
entrepreneurs and MSMEs. Recognizing this challenge,
BCC provides valuable information on funding
options and strategies to help businesses obtain
the necessary financial resources. Moreover, we
actively work to foster investor confidence and create
networking platforms that facilitate collaboration
between small businesses and investors. Our aim is to
bridge the financing gap and empower businesses to
thrive and grow.
Trade Facilitation
Many MSMEs in the Maldives face challenges in
product creation, development, and expanding
into new markets due to the lack of available
infrastructure. BCC aims to overcome these hurdles
by providing the required infrastructure and support
to enhance the development and export potential of
MSME products. We focus on improving marketability,
achieving consistency in products and services, and
empowering businesses to enter global markets
confidently.
Access To Market
Access to markets is a fundamental concern for
entrepreneurs, as they often lack platforms to
showcase their products and access a broader
customer base. BCC addresses this issue by
developing multiple platforms that allow MSMEs
to exhibit their potential, gain brand visibility, and
secure market access both domestically and globally.
Our flagship initiatives, Authentic Maldives, and the
SME Hub, serve as effective channels for businesses
to connect with customers, expand their market
presence, and establish strong brand identities.

Outreach
Lack of business knowledge among and inability to
capitalize on opportunities can result in unfavorable
consequences in an ever-changing market. In light of
this concern, BCC assumes a role to support MSMEs
by disseminating valuable information. To achieve
this, BCC has established the Maldives Business
Network (MBN), a dedicated media channel aimed
at promoting MSMEs. Through MBN, we endeavor
to empower entrepreneurs with the knowledge
and insights necessary to make informed decisions,
navigate challenges, and seize opportunities
effectively.
Entrepreneurship Development
Major concerns affirmed by SMEs include difficulties
faced in effectively managing their resources and
business planning. To address such concerns, BCC
facilitates the development and enhancement
of entrepreneurs’ abilities and startups’ potential.
As such, we provide a number of services, which
can range from being directly involved with the
development of entrepreneurs with training and
workshops to auxiliary services such as the provision
of co-workspaces. By providing entrepreneurs with
the essential skills, knowledge, and environment BCC
aims to lead MSMEs to success.
Contents
Chapter 1
1. Introduction 13
1.1 What is an SME? 13
1.2 Classification of SMEs 13
1.2.1 Overview of Classification 13
1.2.2 Classification of SMEs in Maldives 14
Chapter 2
2. Business & SME Registration 17
2.1 Overview of the SME Registration Process 17
2.2 Importance of Completing your Registration as 18
an SME
2.3 Choosing a Type of Business 19
2.4 The Registration Process 24
2.4.1 Registering your eFaas Account 24
2.4.2 Reserving a Business Name 26
2.4.3 Documents Required for Registration 26
2.4.4 Registering your Business Entity 27
Chapter 3
3. Paving the Path for your Business 29
3.1 Setting Up a Company Account 29
3.2 Mission & Vision Statement 30
3.3 Setting Goals 32
3.4 Creating a Company Profile 34
3.5 Creating a Business Plan 36
3.6 Strategic Planning 38
Chapter 4
4. Financing your Business 41
4.1 Financing Needs 42
4.1.1 Asset Acquisition & Development 42
4.1.2 Working Capital Management 44
4.1.3 Trade Financing 46
4.2 Types of Financing 48
4.2.1 Islamic Financing 52
4.2.2 Debt Financing 56
4.2.3 Equity Financing 66
4.3 Sources of MSME Funding 67
4.3.1 Banks Operating in Maldives 68
4.3.2 Other Funding & Related
Institutions in Maldives 69
4.4 Summary of Financing Facilities Available 72
4.5 Standard Documents Required When
Applying for Business Loans 74
4.6 Obtaining a Credit Report 75
4.7 Taxation 77
4.7.1 Income Tax 79
4.7.2 Goods & Service Tax (GST) 80
4.8 Consultation & Advisory Services 82
4.9 Other Resources 87
Conclusion 88
References 89
CHAPTER
1
Introduction
13
1.1 What is an SME?

Small and Medium-sized
Enterprises, hereby referred to
as SMEs, are by definition, those
businesses that are smaller in size
compared to large corporations.
SMEs are often regarded as the key
drivers of growth in an economy
due to their contribution to GDP
and job creation.
1.2 Classification of SMEs

1.2.1 Overview of Classification
This brings us to the question, how small is a small enterprise
compared to a medium enterprise? And how can you differentiate
between these? In terms of classification, the criteria for determining
the size of an SME can vary depending on the country or region.
This can include a number of factors such as the number of
employees, annual revenue attained by the enterprise, and total
assets. Regardless, generally, SMEs are defined by the number of
employees and/or the level of attained annual revenue.
While the term SME is widely acknowledged and often well

understood, a less common classification also differentiates
between micro-sized enterprises. The term MSME was introduced
by India as numerous ‘micro-sized’ businesses play a key role in the
development of India’s economy. Following this, numerous other
countries have also classified their SME Act to differentiate between
micro-sized businesses and small businesses. Regardless, the
classification of SMEs still varies widely across the globe.
Chapter 1 | Introduction
14
1.2.2 Classification of SMEs in Maldives

“Why is all this distinction necessary?”, you may ask. It is very
useful for you to know if your company is a micro, small, medium
sized enterprise as this allows you to identify the appropriate
financing options, what government support is applicable, how you
should structure your business, and so on. In reference to the First
Amendment to the Small and Medium Enterprise Act [17/2021] of
Maldives, the classification of SMEs in the Maldives is based on three
main indicators. These are as follows:
Number of Total Annual Total Net Profit

Employees Revenue for a Attained within
Year a Year
Additionally, the classification of SMEs in the Maldives is also defined

to include MSMEs. Regardless, in this book, SMEs and MSMEs will be
used interchangeably unless mentioned otherwise. As such, the
classification of SMEs can be summarized as follows.
Number of Total Annual Total Net Profit

Classification Revenue for a Attained within a
Employees Year (MVR)
Year (MVR)
Micro 0 to 5 Up to 1,000,000 Up to 250,000
1,000,001 to 250,001 to
Small 6 to 30 10,000,000 2,500,000
10,000,001 to 2,500,001 to
Medium 31 to 100 30,000,000 5,000,000

15
If a business exceeds any one of the boundaries set by a category,

it does not mean that the business will automatically be placed in
the next level of classification. For instance, if an enterprise earns
an annual revenue of MVR 700,000 and a net profit of MVR 60,000
(which is within the boundary of a micro business), while employing
6 staff (which exceeds the boundary for a micro business), it does
not necessarily mean that the business will be regarded as a small
enterprise. Instead, SMEs are reclassified based on a weighted
formula. Further provisions regarding SME Classification can be
found in the Second Amendment to the Small and Medium Enterprise
[ Act [5/2022]
For more info regarding the classification of SMEs you can refer to
the SME Act at https://trade.gov.mv/laws-and-regulations-dv/
Chapter 1 | Introduction
CHAPTER
2
Business & SME
Registration
17
The word ‘registration’ in this context refers to creating an official

legal record of the existence and specifics of your business. In this
book, we will explore business registration from the perspective of
an SME. The business registration process includes choosing and
registering a business name and registering your business entity at
the Ministry of Economic Development by providing the necessary
documents. The specifics of this process can vary depending on
the type of business. After the business registration is completed,
the SMEs are encouraged to register as an SME to complete the
registration process.
2.1 Overview of the SME

Registration Process
Provided below is an overview of the registration process for an SME.
1 2 3
Reserving a
Registering your Registering
Name for your
eFaas Account your Business
Business
4 5 6
Registering Registering
Logos & Seals your Business Registering as
Activities an SME
Chapter 2 | Business & SME Registration

18
2.2 Importance of Completing

your Registration as an SME
Legal Compliance & Protection: Registering your business
is part of the legal requirements for a business. Failing to
register your business can result in fines and penalties.
Additionally, it allows you to fulfill other requirements
such as obtaining licenses, permits, and registering for
taxation.
Establishing Credibility: Registering your business gives

it validity and assures customers, suppliers, and other
businesses to trust and do business with you.
Protecting Your Business Name: Registering your business

allows you to claim and protect your business name, so
that no other businesses can use it.
Access to Funding: Numerous funding sources are only

available to SMEs. Funding sources, such as bank loans,
require the registration process to be completed before
they consider the provision of funding.
Access to SME Only Initiatives: There are numerous

initiatives that only accommodate MSMEs. For Instance,
BCC developed the SME Hub1 specifically to provide
market access for MSMEs. At the SME Hub, a dozen
kiosks are dedicated for registered MSMEs to showcase
their products and grow their businesses. Registering as
an MSME would mean that your business would qualify
for these benefits.
1
The SME Hub is an initiative by Ministry of Economic Development as the first-of-its-kind,
get-together center for entrepreneurs and targeted towards local MSMEs. This hub is
intended to be an avenue for entrepreneurs from various industries. SME Hub offers market
spaces with affordable kiosks to MSMEs where they can sell their products and services.

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Formalizing your business: Registering your business can

help you establish clear roles, responsibilities, and ensure
that your business is structured in a way that maximizes
its chances of success.
Note: Two Different Types of Registration.
There are two different types of registrations, SME Registration

and Business Registration. The SME Registration process can
only be initiated after you complete the Business Registration
process and receive your Business Registration Certificate.
2.3 Choosing a Type of Business

Now that we have established the importance of completing the
registration process as an SME, to proceed with the registration, you
should first select the type of business entity. In the SME Book, we will
refer to this as a ‘legal entity’. The type of legal entity you choose
will have major implications on how your business will operate. As
such, this will affect high level decisions such as taking loans, setting
up new business activities, introducing new partners/shareholders
to your business, etc. Provided below is a list of legal entities that
you can choose for your business.
Sole General Limited Liability Private Limited

Proprietorship Partnership Partnership Company

20
As part of understanding the types and the differences between

legal entities, we should understand a few concepts that relate to
the topic. One of these concepts is the concept of liabilities and
the difference between “limited liabilities” and “unlimited liabilities”.
Provided below is a technical definition of these concepts.
Unlimited Liabilities:
This is a situation where the owners of the business are personally
responsible for the debts of the business.
Unlimited Liabilities
A
Business Accures
Equity of Liability of
B MVR 200,000 MVR 250,000
A, B and C are Personally Liable for MVR 250,000

C MVR 50,000 more than they have invested into
the business
Limited Liabilities:
This is a situation where the owners of the business are only
responsible for the amount of equity they have put into their business.
A Limited Liabilities
Equity of A and B does not

B MVR 200,000 have to pay interest
C
Takes MVR 30,000
Loan

21
Hence, this would mean that your only loss on the liquidation of your
business is what you had initially invested into the business. And that
you are not required to make any further payments to help settle the
debts of the business.
For instance, if a sole proprietorship owes one of their suppliers a

large sum of money for their inventories, the owner of the sole
proprietorship will have to personally pay off this sum, even if it
means selling their personal assets. Contrastingly, the owners of a
Private Limited Company will not be personally liable. Their creditors
will only be able seize the assets of the company and not the
personal assets of the owners.
However, this does not mean that you do not need to worry about
the debts of your business if you are registered as an entity that
has limited liability.

22
We will explore the concept of liabilities more in the next volume of

the SME Book. Hence, now that you have a general understanding
of what liabilities mean, let us move on to understanding legal entity.
Provided below are the differences between the identified legal

entities.
Sole Proprietorship
A business owned and run by one individual, with
no legal distinction between the owner and the
business. The owner has ‘unlimited liability’ and is
personally liable for all debts and obligations of
the business.
General Partnership
A business owned and run by two or more
individuals, with no legal distinction between the
partners and the business. The partners have
‘unlimited liability’ and are personally liable for all
debts and obligations of the business.
Limited Liability Partnership

This is a type of partnership in which some or all
partners have limited liability for the debts and
obligations of the business.
Private Limited Company

A type of company in which the shareholders
have limited liability for the company’s debts.
It should be noted that there are many other differences between the
legal entities. Regardless, this introduction into legal entities should
give you an idea of what type of legal entity is appropriate for your
company. We will explore the concepts of legal entities, liabilities,
and ownership in depth in the next volume. Provided below is a
quick summary of the types of legal entities for your convenience.

23
Limited Private
Type of Sole General Liability Limited
Business Entity Proprietorship Partnership Partnership Company
Liability Type Unlimited Unlimited Limited Limited
Registration Fee MVR 500 MVR 2,000 MVR 2,000 MVR 2,000
Annual Fee 10-year MVR 2000 MVR 2000 MVR 2000

Validity + (% of equity)
Number of Owners As As
/ Partners / 1 Defined in Defined in 50
Shareholders Partnership Partnership
Agreement Agreement
Type of Natural Natural Natural & Natural &

Shareholders Only Only Legal Legal
Note: Natural vs Legal Shareholders
A shareholder can be either a natural person or a legal

person. Where a shareholder is a natural person, it is an
individual who personally owns shares in a company. In the
case of a legal person, it is a legal entity that owns shares in
a company. This legal entity is treated as a separate person
from its actual owners in the eyes of the law. In practice,
this distinction is important because it allows companies
and organizations to conduct business and manage their
finances as separate entities from their owners and limit the
liability of the owners.

24
2.4 The Registration Process

Now that you have a general idea of the type of legal entity for your
company, next let us look at the registration process. In this section,
we will go through an overview of the precursors to the registration
process.
2.4.1 Registering your eFaas Account

You can register your business via the Business Portal. To access the
Business Portal, you will need an active eFass account. eFaas is a
digital ID card that enables you to access numerous government
services. You can register your eFaas account via eFaas website,
the business portal, or over the counter at the Ministry of Economic
Development.
Visit the Ministry of Economic Development at

Ameer Ahmed Magu, Male’ 20125
Contact: (+960) 332-3668
Email: info@trade.gov.mv
Note: The Business Portal is a platform by Ministry of Economic

Development
The Business Portal is an online platform by the Ministry of Economic

Development, presented as a one-stop portal for all business-
related services. The portal was initiated as part of the ministry’s
efforts to reduce counter services and increase its online presence.

25
To register your eFaas account you will need to provide the following:
National ID Card Number A Passphrase
ID Card Serial Mobile Number
A Password Email
After you register your eFaas account and verify your credentials,
you will be provided access to the business portal.
Register efaas at https://efaas.egov.mv/
Visit the business portal at https://business.egov.mv/
Login to your business portal account at

https://business.egov.mv/Account/Login

26
2.4.2 Reserving a Business Name

The next step in the registration process is to reserve a name for your
business. Your business name is reserved for both (1) business activity
and (2) business entity. However, your business activity can only be
registered after the business entity is registered.
It should be noted that your business name is reserved for 14 days

and during this time no other business can reserve or register the
name you have reserved. Hence, it is recommended to register your
business during this period and if the duration expires before you
register, you will be required to reserve the name again. Additionally,
if your reservation expires, it will also be possible for another party to
reserve and possibly register the name.
2.4.3 Documents Required for Registration

The documents required for registration can vary depending on the
type of business. Hence, we have summarized this in the table below
for your convenience.
Limited Liability
Private Limited
Proprietorship
Partnership
Company
General/
Sole
Document
NID Card Copy of Applicant

NID Card Copies of All Legal Persons (Shareholders,
Directors, Partners)
Representative Acceptance letter (If any assigned)
Representative Acceptance ID copy (If any
assigned)
Partnership Agreement
Declaration from Managing Director/Partner
Declaration from Company Secretary
Memorandum of Association
Articles of Association
Tax Responsible Person Information Form

27
You can download the templates of Memorandum of Association,

Articles of Association, and the Partnership Agreement from the
publications page of the business portal.
Visit the publications page of the business portal at
https://business.egov.mv/Home/LawsRegulation
Memorandum of Association vs Articles of Association

Memorandum of Association is a legal document that outlines the
constitution and objectives of a company. It includes the company’s
name, registered office address, share capital, and founding
members.
Articles of Association is a legal document that sets out the internal

rules and regulations governing the company’s operations and
management. It covers a range of topics, including the management
of the company, conduct of meetings, transfer of shares, appointment
and removal of directors, and distribution of profits.
Both documents are important for the establishment and governance

of a company and is required by law depending on the type of legal
entity selected.
2.4.4 Registering your Business Entity

In this chapter, we have highlighted the importance of registering
your business, explained legal entity, and provided an overview of
the registration process. As evident from this chapter, the registration
process can vary in terms of the registration process, documents
required, how you would interact with the registration portal, etc.
depending on the type of legal entity selected.
After completing the business registration process, you shall then

register your business as an SME. It should be noted that SME
registration can only be completed after the business registration
is completed.
Volume 2 of the SME Handbook will provide step by step guidance for Name
registration and business registration.

CHAPTER
3
Paving the
Path for your
Business
29
As a business owner, you should have a general idea of what your

business will be doing and where it will be heading. As these will
prominently vary for every business, we will not be looking into the
specifics, but explore some of the instruments used in this procedure.
These instruments can at times be intertwined with each other.
Hence, it would be important to obtain a general understanding of
the listed concepts in order to visualize your business direction.
3.1 Setting Up a Company

Account
Once the SME registration process has been completed, most
businesses hurry to create a company account. A company account
refers to a bank account that is set up specifically with the purpose
of managing the financial transactions of your SME. Often, this is
a dedicated current account offered specially for businesses by a
bank. These business accounts often offer additional benefits when
compared to personal accounts. The benefits include higher levels
of flexibility, convenience when making overseas payments, access
to Point of Sale (POS) terminals, corporate cash cards, and so on.
However, it should be noted that a dedicated business account may
require a higher minimum deposit when compared to a personal
account.
Chapter 3 | Paving the Path for your Business

30
Regardless of what benefits your bank offers to businesses for

their business account, it is important that you make a dedicated
company account for multiple reasons. Having a company account
would mean that the financial transactions of the owners and the
business can be separated. This would help your SME to manage its
financial transactions in an organized and efficient manner, which
can lead to improved credibility with suppliers, customers, and
investors. Furthermore, a company account would assist in creating
a clear record of the company’s financial activities. This is crucial
for tax purposes, financial reporting, and maintaining the company’s
legal standing. Additionally, this will also assist you in obtaining
funding though banks and institutes.
3.2 Mission & Vision Statement

When visiting the website of an organization or going through their
promotional materials, you may have noticed that companies often
have a statement called a ‘Mission’, which is often followed by
another statement named ‘Vision’. If you think that these statements
are often formulated by organizations because they serve some
purpose, you would be on point! So, what are mission and vision
statements and what purposes do they serve?
A mission statement is a declaration that defines the overall purpose

of the existence of an organization. A mission statement is typically
a short, clear, and concise statement that provides direction and
purpose for the organization.
A vision statement, on the other hand, is a set of long-term aspirations

and goals of an organization. It is a statement of what the company
wants to become in the future and how it wants to redefine its
environment. A vision statement is typically more inspirational and
forward-looking than a mission statement.

31
Both the mission and vision statements combine to serve several

purposes. This can include:
Providing direction and focus for the organization by clearly

stating what the company does and what it aims to achieve.
Helping to align the actions and decisions of employees,

stakeholders, and customers with the overall goals and
values of the organization.
They serve as a guide for making strategic decisions and

allocating resources.
They help to differentiate a company from its competitors

and create a unique brand identity.
Mission & Vision Statement of BCC
Mission
Foster, support, & promote inclusive economic growth through
the provision of a full range of business services to support
Micro, Small, & Medium Enterprises.
Vision
Create an enabling and inclusive economy of competitive,
innovative, and sustainable MSMEs with access to infrastructure,
assistance, and global opportunities to thrive in.

32
3.3 Setting Goals

It is crucial for every business to set goals. These goals help provide
direction and focus for your company. Goals also help to motivate
and engage employees, as they can see how their work contributes
to the overall success of the company. Additionally, having clear
goals in place can help to identify potential problems or areas for
improvement, and can provide a framework for decision making.
However, not every goal is equal. This does not mean that there are
‘right’ and ‘wrong’ goals. But some goals provide better direction
and focus for your business. Hence, you should formulate your goals
in a way that they retain these qualities.
S
Specific
Your goals should be clear and well-defined. It should
answer questions such as what, why, who, and how.
M Measurable
Your goals should be quantifiable so that progress can be
tracked, and you can identify the progress towards your
goal.
A Achievable
Your goals should be realistic and achievable based on the
resources and constraints of your business situation.
R
Relevant
Your goals should be relevant to the overall mission and
vision of the organization.
T
Time-bound
Your goals should have a specific target by when it should
be achieved.

33
These qualities are more commonly known as SMART, and by

following this framework, you can create goals that will increase the
chances of success.
Example: A SMART Goal
A SMART Goal for a business could be: “Increase sales revenue

by 10% within the next 12 months through expanding our online
presence by creating a new website and using social media
and email marketing campaigns to target new customers.”
In this example, the goal is specific (increase sales revenue by
10%), measurable (10% increase in sales), achievable (through
expanding online presence), relevant (to the overall mission and
objectives of the organization) and time-bound (within the next
12 months).
Your goals can either be (1) long term – which are also known as
“strategic goals”, (2) medium-term – also known as “tactical goals”,
or (3) short-term – also known as “operational goals”. Operational
goals are declared in your operational plan and relate to the day-
to-day activities in your organization. These are usually supervised
with the use of daily, weekly, or monthly reports. Tactical goals often
relate to how you allocate, spend, and acquire resources and are
detailed in your business plan, while strategic goals are declared
in your strategic plan. In this volume we will only be looking into
strategic planning. We will take a more detailed look into business
and operational planning in upcoming volumes of the SME Book.

34
3.4 Creating a Company Profile

If you are interested in connecting with customers and attracting
investors, creating a company profile would be an important step.
A company profile is a short profile that gives an introduction to the
story of your business. Company profiles are regarded as the first
and the most versatile marketing tool for a business. A company
profile will demonstrate that you are not a faceless business and
that people with real goals and determination are leading the
business. The length of a company profile can vary from a few pages
to a dozen depending on your audience. Provided below is a sample
template for a company profile.

35

36
3.5 Creating a Business Plan

To pave the path of success for your SME, it is important to have a
roadmap. And this is the function served by a business plan. If you
completed your business and SME registration process, you will have
a general idea of where you want to go with your business. However,
you may not have the specifics in ink. This is one of the reasons why
it is important for you to formulate a business plan.
At this point, if you are not familiar with business plans, you may
wonder what a business plan consists of. Regardless of how you
decide to structure your business plan, to create a business plan,
all you need to do is answer and clarify just several basic questions.
The answers to each of these questions can be provided in an
appropriate section. Provided below is one way you structure and
formulate your business plan.
Section Questions
What is the purpose of your SME?

Mission & Vision Where do you see your SME in the
future?
What do you have to do to achieve

Business Goals your mission and realize your vision?
What is your target market & what are

their characteristics?
Market Analysis
What is the marketing standing of
your competitors?

37
What products and services are you

Products & offering?
Services What benefits does your products
offer?
How will you price your product?

Pricing How does it compare to the market
price in terms of value?
How will you reach your customers?

Marketing
Strategy What will you do to grab their
attention?
What are the processes involved in

Operational your SME?
Plan How will you carry out these
processes?
Based on all the previous

Financial considerations, where do you expect
your SME to be in financial terms
Projections within the next few years?
In this volume we have shed some light on some of the questions

that should be answered in a business plan. In upcoming volumes,
we will be going into the details of how these questions can be
answered and what tools businesses use to assist in the process of
formulating a business plan.

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3.6 Strategic Planning

Why do some firms succeed and why do others fail? How would you
even know if you are on the right path? This is what strategy will
help you with. A strategy is a long-term plan of action designed to
achieve a particular goal or set of goals. A strategy answers 4 main
questions. They are:
1. Where is your business now?
2. Where do you want to go?
3. How will you get there?
4. How will you know when you get there?

39
To solidify your answer to these questions, it is important to detail

these in a plan, which is fittingly named a “strategic plan”. Your
strategic plan should include the following.
Your mission and vision – which sets the purpose and direction
of your business.
Analysis of your internal & external environment and your

organizational strengths, weaknesses, opportunities &
threats (often known as a SWOT analysis) – which identifies
your current business situation.
Your strategic goals – which define where you want to go.

Selection of appropriate strategies – which defines how you
will approach achieving these goals.
Defining metrics, key performance indicators (KPIs), and

timelines – which will assist you in identifying when you
achieve your strategic goals.
We have already covered mission, vision, and strategic goals in the

previous sections. We will be offering a more detailed look into other
components of the strategic plan in future volumes.

CHAPTER
4
Financing your
Business
41
Once your business is registered and you have a specific goal in

mind, next you may be interested in raising finances to achieve your
business objectives. Most MSMEs fund their businesses by using their
own savings. This is often known as ‘bootstrapping’ as this is the
equivalent of ‘gripping your own bootstrap and pulling yourself up’.
While financing your business by yourself is a challenging task, it does
come with its benefits. Bootstrapping allows one to be free from the
opinions and judgements of investors. It allows the entrepreneur to
make all the relevant business decisions independently and create
something truly innovative. Furthermore, this would mean that you
will not be forced to sell your own assets to pay off loans or other
borrowed funds.
While sometimes bootstrapping is necessary, most of the time

SMEs engage only in bootstrapping due to lack of experience. It is
unlikely that most owners can invest the amount of funds necessary
to achieve all the business objectives. Additionally, this would mean
that only you will be bearing all the business risks. Losing it would
mean losing your fortune. Regardless, it can be rather important
to raise the necessary funds through other means whenever the
situation calls for it.
Chapter 4 | Financing your Business

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4.1 Financing Needs

Financing needs for SMEs can be broadly classified into three
categories:
Asset Acquisition & Development
Working Capital Management
Trade Financing
4.1.1 Asset Acquisition & Development

This involves financing for acquiring and or developing long-term
assets such as property, plant, & equipment (PP&E) or other fixed
assets. SMEs may require financing for asset acquisition when
establishing their premises, expanding operations, or replacing
obsolete assets.
Before we proceed with discussing the financing needs for your SME,
there are some basic terms and concepts you should be familiar with.
This section will give you an overview of these terms and concepts and
attempt to familiarize you with these conceptions.
What is an asset?
An asset is something that a person or a company owns and has

value. It can be used to generate income, exchanged for monetary
gain, or used to provide future benefits. Assets can include Fixed
Assets and Current Assets.

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Fixed assets are typically long-term assets that have a useful life
of more than one year and are not intended for resale. This can
include land, machinery, and building. It is important to remember
that the value of an asset can change over its useful life. For this
reason, you should keep track of the assets value and ensure that it
is being managed properly.
A current asset is an asset that is expected to be converted into

cash or consumed within a relatively short period, usually within one
year. Examples of current assets include cash, accounts receivable
(money owed by customers), inventory (goods held for sale), and
prepaid expenses (expenses paid in advance). These assets are
considered easily convertible into cash and are vital for supporting
the day-to-day operations and meeting short-term obligations of
a business.
What are Liabilities?
Liabilities are obligations or debts that a company or individual

owes to external parties. It another way of saying that your SME
owes something to someone. Liabilities can be Long-term or
Short-term (more commonly known as Current Liabilities).
Current liabilities are debts that are expected to be settled within

a short period, typically within one year. Examples of current
liabilities include accounts payable (money owed to suppliers),
short-term loans, accrued expenses (expenses incurred but not
yet paid), and taxes payable.
Long-term liabilities, on the other hand, are debts that are due
beyond the next 12 months. These can include long-term loans,
bonds payable, and mortgages.
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4.1.2 Working Capital Management

Let’s say you run a small lemonade stand and you need cups,
sugar, and lemon, etc. for your daily operations. You fund the daily
operations of your lemonade stand with money from your jar of coins.
If you have enough coins in the jar you can keep the stand going.
If not, you might have to stop selling lemonade. Working capital is
like this jar of coins. It is the money that a business needs to keep
running its day-to-day operations. It is the cash that a business can
use to pay for things like rent, inventory, employee salaries, etc.
MVR 160,000
Current Assets Inventory Cash
MVR 65,000
Current Liabilities
Wages Rent Utilities taxes
MVR 95,000
Working Capital
Cash Short-term Inventory Operating
debt Expenses
Your neighbor might say that they will pay for their lemonade 3
weeks from now and this becomes money that you currently cannot
use to buy inventory for your stand. You will likely receive it at a later
date, but if you do not have enough cups to sell lemonade today,
you may face difficulty keeping the store open tomorrow. This brings
us to the cash cycle. The cash cycle is the process of how a business
turns the money they use to buy things into the money they receive
from customers

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The management of the cash cycle involves four important

components.
Receivables: money owed to a Accounts

business by its customers. Receivables
Payables: money a business

Cash
owes to its suppliers. Inventory Conversion Cash
Cycle
Inventory: stock of goods
a business holds for sale.
Accounts
Cash: the physical currency and
Payables
balances in a business’s bank
account.
The goal of managing the cash cycle is to make sure that you have
enough money to buy the lemons and sugar, and to make sure
that your customers pay you for the lemonade before you run out
of money. Financing your working capital means ensuring that you
have enough money at hand to manage the day-to-day operations
of your business.
Cash flow vs profit

Cash flow and profits are not the same thing. While both are
important, they measure different aspects of a business’s financial
health.
Profit is the amount of money a business earns after subtracting all

of its expenses, such as rent, salaries, and taxes. It is the difference
between what you earn and what you spend.
On the other hand, cash flow refers to the actual cash that comes
in and out of a business. This includes the cash received from
customers, the cash paid to suppliers and employees, cash spent
on investments, etc.
For example, if a business sells a painting for $100 but allows the
customer to pay in 30 days, that sale will count as a profit right
away, even though the business has not received the cash yet.
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4.1.3 Trade Financing

Trade financing is a type of financial support that helps businesses
with their buying and selling activities. It provides financing to buyers,
sellers, or intermediaries involved in a trade transaction to help them
complete the transaction. This can include things like letters of credit
and guarantees.
Trade financing is important because it helps reduce the risks

associated with trade transactions, such as non-payment or
delayed payment. This makes it easier for businesses to buy and sell
goods or services with other businesses, especially in international
trade where transactions can be complex and risky.
Let’s consider a scenario where a Maldivian company intends to

purchase machinery from a Chinese supplier, and the Maldivian
company wants to ensure that payment is made securely before
the machinery is shipped. Since the Maldivian company may not
have sufficient cash immediately available to pay for the machinery
upfront, they decide to apply for trade financing from a bank. The
bank issues a letter of credit to the Chinese supplier, assuring them
that payment will be made once the machinery is delivered, and
the agreed-upon conditions are met. This arrangement provides
confidence to the Chinese supplier, as they can rely on the bank’s
guarantee of payment, allowing the machinery to be shipped
without concerns about payment delays or default.

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An SME comes to a If SME doesn’t have

sales agreement with cash in hand to pay
Chinese company to upfront, they can go
purchase a for a trade financing
machinery from solution
China
Local bank issues The SME applies for

LC and forwards it Letter of Credit (LC)
to bank in China for from local bank
authentication
Chinese company Documents are

ships the machinery released and the
after receiving LC SME claims its
from the bank goods
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4.2 Types of Financing

In this section we will be looking into the types of financing available
for SMEs. In the following sections, we will be looking into the sources
where you can obtain financing sources and a summary of these
sources. Types of financing for your SME can be split into two main
categories. They are:
Debt financing
This involves borrowing money from lenders or investors, which
must be repaid with interest over a specified period. In this case,
the lenders or investors become creditors to the business and do
not have ownership rights. If the borrower is unable to repay the
borrowed amount, the lenders or investors can take legal action to
recover the amount. Debt financing is beneficial to SMEs as it does
not dilute their ownership or control over the business. However,
excessive debt can lead to financial strain.
Examples of Equity financing options
Venture
Capital
Equity
Angel financing
Investors
Crowdfunding

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Equity financing
This involves selling ownership shares of the business to investors.
In this case, the investors become part owners of the business and
share in the profits and losses. Equity financing is beneficial to SMEs
as it does not require repayment of the investment amount, and the
burden of risk is shared among the investors. However, the downside
is that SMEs dilute their ownership and control over the business,
and they must share the profits with the investors.
Examples of Debt financing options
Asset accuisition
loans
Debt
financing
Working
capital
loans
Letter of
Credit
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Debt Financing Equity Financing
Advantages
Keep full ownership Keep full ownership
No obligations after No paying back funds

paying debt
Gain credibility through
Interest is tax deductible Investor networks
Short and long-term Investors don’t expect

options Immediate ROI
More cash on hand Fixed payments for

better budgeting
Disadvantages
Must pay back Investors returns could

be more than debt
Could cause cash flow payments
issues
Investor gets some
Usually need collateral ownership
Most consult investor For

decisions

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Debt & Equity Financing can be short-term or

long-term.
Short term financing Long term financing
Fund immediate short Fund long term

term needs such as investments such as
fund for working capital asset acquisitions and
expanding operations
Usually for 1 year period
More than 1 year
Shorter repayment
period Longer repayment
period
Higher interest rate due
to high risk Low interest rate as
risk is spread for a
longer duration
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4.2.1 Islamic Financing

While Islamic Financing options are similar to conventional financing
methods, they are different in one very significant way. Islamic
financing methods and concepts are shariah compliant. As such,
the agreement between the lender and borrower are structurally
different in Islamic financing. Islamic Finance considers money as
an instrument for measuring value and not an end itself. Islamic
Financing options follows the concept that no one should be able to
receive more income from just money alone. For this reason, we have
differentiated Islamic financing options from conventional methods.
Islamic Conventional
Profit Rate FINANCING Interest rate

PROFIT
MONTHLY
Fixed Payment Fixed & floating
INSTALLMENT
Period rate
Legal activity
Shariah & can be
Compliant BUSINESS SCOPE
non-shariah
Activity Compliant
Compensation LATE PAYMENTS Penalty

(ta’widh)
Allowed. But
Enjoy Rebate EARLY there is penalty
SETTLEMENT if loan has lock in
Period

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Listed below are some of the main concepts of Islamic financing:
Murabaha
This is a cost-plus-profit arrangement where the lender purchases
an asset on behalf of the borrower and then sells it to them at a
marked-up price. The borrower pays back the price in installments.
This is commonly used for financing the purchase of goods, such as
a car or home.
Bank purchases the vessel from

seller at MVR 1,000,000 2 ABC company applies for bank
for vessel financing
1
Seller
Bank ABC
Company
Bank sells the asset to ABC company on Murabaha basis of MVR 1,120,000
3
Bank ABC
Company
ABC company pays selling price to bank in monthly installments 4
Mudarabah
This is a profit-sharing arrangement where the lender provides the
capital, and the borrower manages the business. The profits are
shared between the two parties based on an agreed ratio. However,
if there are losses, the lender bears the entire loss.
Musharaka
This is a partnership arrangement where two or more parties
contribute capital to a business venture. Profits are shared based
on an agreed ratio, while losses are shared based on the amount of
capital contributed.
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One common variation of Musharaka is the Diminishing Musharaka

model. In this model, the financier gradually transfers its ownership
share to the business owner over time.
1 2
The SME and the bank enter. The bank initially owns a
Into a diminishing Musharaka majority share, and the
partnership agreement for business owner holds a
financing an asset minority share of the asset
3 4
The business owner has the SME makes regular payments

right to use and benefit from that include repayment of
the asset based on their the bank’s share and a profit
ownership share margin
5 6
With each payment, the Once the agreed-upon

business owner’s ownership payments are completed, the
share increases, while the business owner becomes the
bank’s share decreases sole owner of the asset

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Ijarah
This is a leasing arrangement where the lender purchases an asset
and leases it to the borrower for a fixed period. The borrower pays
rent to use the asset, and at the end of the lease period, they may
have the option to purchase the asset.
Istisna
This type of financing refers to a contract between a manufacturer
and a buyer, where the manufacturer agrees to produce a specific
good and deliver it to the buyer at a predetermined price and time
in the future. From a financing perspective, the payment for the
asset is typically made in installments, with each installment tied to a
specific stage of completion. This allows the buyer to make payments
gradually as the asset is being constructed or manufactured.
Sukuk
These are Islamic bonds that are structured to comply with Shariah
principles. Instead of paying interest, the issuer of the bond shares
the profits generated from the underlying assets with the investors.
Sukuk can be issued for a specific project or asset, such as a real
estate development or a power plant.
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4.2.2 Debt Financing

In this section we will be looking debt financing options available for
MSMEs in Maldives.
Bank Loans
A bank loan is a type of debt financing product offered by banks
and financial institutions, which allows individuals and businesses to
borrow money for a specific period of time (short-term or long-term),
usually with the requirement to repay the loan amount with interest.
Additionally, the loan can sometimes involve a collateral depending
on the loan amount. Regardless, bank loans are the most sought-
after form of financing for MSMEs. Bank loans can come in many
different forms and names. However, when considering the type of
funding for your business, it is important to look past these names
and consider what they are offering to your business and what the
costs involved in the option.
Provided below are key terms in financing that can impact the cost
and structure of loans:
Loan Amount: This is the total amount of money that a lender is

willing to lend to an SME. The maximum loan amount can depend on
factors such as the SME’s cash flow, duration of operation, and can
be tied with the collateral.
Interest Rate: This is the cost of borrowing money, usually expressed

as a percentage of the loan amount. A higher interest rate means a
higher cost of borrowing.
Repayment Period: This is the amount of time given to the borrower

to repay the loan. A longer repayment period can mean lower
monthly payments, but it also means more interest paid overtime.

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Grace Period: This is the period of time after the loan is disbursed
where the borrower is not required to make payments. A grace
period can give your SME time to generate revenue before you must
start repaying the loan. However, interest may still accrue during the
grace period.
Timeline of Loan
Interest Accumulation
Grace Period Repayment Period
Collateral: A Collateral is something valuable that you give to a

lender to guarantee that you will pay back a loan. This is more than
often a fixed asset such as a vehicle or property but can also be a
current asset such as inventory.
For example, let’s say you want to buy a car, but you don’t have
enough money to pay for it in full. You decide to take out a car loan
from a bank, but the bank wants to make sure that they will get their
money back. In this case, the car you want to buy can be used as
collateral for the loan. So, if you are unable to make your car loan
payments, the bank can take possession of the car and sell it to
recover the money you owe them. In this way, the car serves as a
guarantee that you will pay back the loan.
Loan
Pledged as collateral
Missed loan payments? Lender can seize collateral
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Guarantee: A guarantee is a promise or assurance made by one

party, to take responsibility for the debt or costs involved in case
they are unable to fulfill the agreement. It acts as a form of security
provided to lenders to reduce their risk ensure that the agreement
will be fulfilled even in unexpected situations.
Lender provides the loan
Borrower repays the loan

Lender
Borrower
Guarantor fulfils
Borrower defaults
borrower’s obligations
Gurantor
In this example the guarantee provided by the SME is a personal

guarantee. However, it can also be a joint guarantee where multiple
parties are involved, or a corporate guarantee where a corporation
agrees to be legally responsible for the debt.
Trade Credit
Trade credit is a form of financing that allows businesses to buy
goods and services from suppliers on credit with a short payment
deadline. In essence, trade credit is a type of short-term financing
that allows SMEs to purchase goods and services without immediate
cash payments.
Trade credit is commonly used by SMEs to manage cash flow, as

it allows them to extend their payment deadlines and delay cash
outflows. For example, an SME might negotiate with a supplier to
pay for a shipment of goods 30 days after receiving them, giving
them time to generate revenue from the sale of those goods before
having to pay for them.

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Trade credit is often extended by suppliers as a way to maintain

good relationships with their customers and encourage repeat
business. In some cases, suppliers may offer discounts or other
incentives to customers who pay early or on time.
While trade credit can be an attractive financing option for SMEs, it

is important to manage it carefully and avoid overextending credit.
Late or missed payments can damage relationships with suppliers
and harm credit ratings, making it more difficult to obtain trade
credit in the future.
Leasing
Leasing is a financing option that allows businesses to rent assets
such as equipment, vehicles, or property, for a specified period, in
exchange for regular payments. A lease involves two parties the
lessor (the lender) who purchases the asset (perhaps at a prior time)
and the lessee (the borrower) who borrows the asset and benefits
from using the asset without having to purchase it. Leasing is a
way for SMEs to access assets without the upfront costs and risks
associated with purchasing the asset. Leasing also reduces the
burden on your business to manage and maintain a purchased
asset. For example, a dredging company may find leasing
beneficial for acquiring heavy-duty dredging equipment. Instead of
purchasing the equipment outright, the company can enter into a
lease agreement with a leasing company. This allows the dredging
company to use the equipment for a specific period, such as a
project duration.
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Leasing can be of three types.
Financial (Capital) Lease: This type of lease resembles a long-term

loan, and the lessee has the benefits and risks of ownership and is
responsible for costs associated with the asset. At the end of the
lease term, the lessee may have the option to purchase the asset at
a predetermined price or return it to the lessor.
Operating Lease: This type of lease is typically short-term and

allows the lessee to use an asset without bearing the risks associated
with ownership. The lessor retains ownership and responsibilities for
maintenance and other costs. An operating lease is rather similar to
renting.
Sale and Leaseback: In this arrangement, a company sells the

asset(s) to a lessor and immediately leases it back. In other words,
the company becomes the tenant of the asset it previously owned.
This allows the company to free up capital while retaining use of the
asset. When considering this type of lease, it is important to carefully
evaluate the terms and costs associated with the lease agreement
to ensure it aligns with the company’s long-term objectives and
financial stability.
Leasing vs Ijarah
Leasing is similar to the Islamic financing concept of Ijarah with

the main difference being under Ijarah, rent is charged when the
asset is made available to the lessee for use. However, under
conventional leasing, interest is charged once the contract is
signed, regardless of whether the asset is made available to use
or not.

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Let’s say you need a new vegetable peeling machine for your
business
Should you lease it or buy it? Which one is right for you?
Lease Buy
When you lease, you only When u by an asset, it is

pay the asset for duration yours forever
of your use
Can lead to more savings
Leasing gives you the long term
flexibility to upgrade/
replace the asset You are free to use the
frequently asset as you please
You can save on asset

maintenance
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Debt Factoring
Debt factoring is a financial service that involves selling accounts
receivable (outstanding invoices) to a third-party (factor) at a
discounted (lower) rate in exchange for immediate cash. The Factor
then collects the full amount from the customers who owe the money.
An SME may consider debt factoring when it needs to improve its
cash flow by receiving immediate payment for outstanding invoices.
This can help the business to maintain its operations and invest in
growth opportunities without waiting for customers to pay their
invoices. Debt factoring may also be useful when the SME does not
have the resources or expertise to manage its own credit control
and collection process, as the factoring company can take on
this responsibility. However, it is important to consider the costs
associated with debt factoring, including the factoring fee and any
interest charges, and to ensure that the benefits outweigh the costs.
Debt Factoring Process
1 2 3
Your business agrees You provide the The factor pays your
to sell your unpaid relevant documents business a portion
customer invoices to and sell the invoices of the invoice value
a factor. to the factor at a upfront, providing
discounted price. immediate cash flow.
4 5 6
The factor takes Once the customers You can continue
charge of collecting pay in full, the factor selling invoices to
payment from the deducts its fees and the debt factor as
customers mentioned returns the remaining needed to access
in the invoices. balance to you. immediate cash flow.

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Overdraft Facilities
A business overdraft is a type of loan that allows a business to
overdraw their account up to a certain limit. To ‘overdraw’ your
account means withdrawing more money from your bank account
than you currently have available, resulting in a negative balance.
This can allow SMEs to cover unexpected expenses and manage
their working capital. An overdraft is a flexible financing option
where interest is only charged on the amount borrowed and for the
duration it is used. For example, if an SME selling traditional dresses
experiences a temporary cash flow shortage due to an unexpected
expense, it can use its business overdraft to cover the shortfall
until the next customer payment is received. The SME will only pay
interest on the amount borrowed, and once the overdraft is repaid,
the available credit limit will be restored. Overdraft facilities are tied
to a bank account and are generally available with any corporate
account.
An overdraft can save you from an unexpected expense
MVR -30,000 MVR 25,000 MVR 5,000
Unexpected Working Capital Overdraft

Expense
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Debt Securities
Debt securities are a type of guarantee from your company made
to the investor promising that you will pay them back by a specified
date. When a business issues debt securities, it is essentially
borrowing money from investors in exchange for a promise to pay
them back with interest. Investors who buy the debt securities
become creditors of the business, and the business is obligated to
repay the principal and interest on the securities according to the
terms of the agreement.
The sale of debt securities can be an attractive option for businesses

because it allows them to raise funds without giving up ownership
or control of the company. Before raising debt securities, an SME
should consult with legal and financial professionals to ensure that
it complies with relevant securities laws and regulations. It should
also carefully consider the terms and structure of the debt offering,
including interest rates and repayment terms.
There are several types of debt securities; the most common of which
is a bond. A bond is a type of debt security issued by a government,
corporation, or other entity to raise capital. When you buy a bond,
you are lending money to a company, government, or organization.
In return, they promise to pay you back the money with interest after
a certain period of time. It’s similar to when you lend money to a
friend and they promise to pay you back later, but with a bond, it’s
more formal and involves larger amounts of money. As an SME you
can issue bonds to raise capital as well.

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Repayment with Interest
Issue Purchase
Company Corporate Investors

Raise funds Bond Become lenders
for Business in the process
Purposes
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4.2.3 Equity Financing

In this section we will be looking into the equity financing options
available to MSMEs in Maldives.
Venture Capital
This is a type of financing offered MSMEs by venture capital firms.
These firms invest money in exchange for ownership or equity in
the company. It is similar to having a partner who believes in your
business idea and is willing to invest money to help it grow. Venture
capitalists also offer guidance, mentorship, and industry expertise to
increase the chances of success. In return, they expect a share of the
company’s profits or a return on their investment when the company
becomes successful. The advancement of venture capital in
Maldives is currently managed by state-owned enterprise, Maldives
Fund Management Corporation (MFMC). The corporation will be
launching three distinct funds targeted towards the advancement
of tourism, infrastructure, and renewable energy. As such, Venture
Capital funding in Maldives is currently at an initial state.
Crowdfunding
This type of financing allows SMEs to raise finance by collecting small
contributions from a large number of people. In return, depending
on the type of crowdfunding, the contributors can receive rewards,
pre-orders of products, or even equity in the business. Crowdfunding
is a collaborative and community-driven approach to financing
that allows people with innovative ideas or limited access to
traditional funding sources to gather financial support from a wide
audience. Online crowdfunding options can include platforms such
as Kickstarter, GoFundMe, and Indiegogo. While there are number
of online crowdfunding options available online, currently there
are no registered platforms facilitating crowdfunding in Maldives.
Regardless, as an SME you may want to be on the lookout for online
options and opportunities for crowdfunding.

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4.3 Sources of MSME Funding

In this section, we will highlight a number of financing sources
available to MSMEs. While it is possible that you may be able to
acquire the same net amount of money, no two types of financing
are the same. Each and every financing option will have its pros
and cons. Hence, it would be important to carefully research your
options. Suitable financing options for your business will depend on
the industry and size of your business. After we go through financing
sources available in Maldives, we will be looking at a summary of the
options available.
Tip: Seek professional advice from a financial expert
If you are unsure about any financial decisions regarding the

development of your MSME, you should contact a financial
expert to assist you. This can be your bank, professional
accountants, or independent financial advisors.
Consultation Services are available at Business Center

Corporation as well. This will be further discussed in a later
section.
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4.3.1 Banks Operating in Maldives

Provided below are a list of banks currently operating in Maldives. The
debt financing options made available through each bank and the
specifics of these options in terms of interest, payment period, etc.
can vary. If you have an account with any of these banks and/or are
interested in looking for more financing options, it is recommended
that you contact them and check your options.
Bank of Maldives Plc. (BML)
State Bank of India (SBI)
Habib Bank Limited (HBL)
Bank of Ceylon (BOC)
Mauritius Commercial Bank Maldives Pvt. Ltd. (MCB)
Maldives Islamic Bank Plc (MIB)
Commercial Bank of Maldives Pvt Ltd. (CBM)

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4.3.2 Other Funding & Related Institutions in Maldives

In addition to banks, several noteworthy funding & related
institutions are present in Maldives. Each and every one of these
institutions provides a unique opportunity and presents a different
way of funding your SME. As such, we will be providing you with a
short overview of the institutions listed below.
SME Development Finance Corporation

(SDFC)
Maldives Finance and Leasing Company

Private Limited (MFLC)
Housing Development Finance

Corporation (HDFC)
Maldives Stock Exchange (MSE)
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SME Development Finance

Corporation (SDFC)
SDFC is an institution that was formulated with
the mission of supporting the growth of MSMEs
by providing solutions that cater to their
financing needs. As such, they offer several
financing options that are tailored to MSMEs.
These financing options focus on tourism,
agriculture, manufacturing, fisheries, and
the ICT industry. The minimum and maximum
loan amount, equity requirements, maximum
repayment period, etc. can vary depending on
the type of the financing option.
For more info, visit https://sdfc.mv/
Maldives Finance and Leasing

Company Private Limited (MFLC)
MFLC is a private financial institute, wholly
owned locally, and governed by the central
bank, Maldives Monetary Authority (MMA). The
company has over two decades of providing
innovative lease and finance solutions to our
customers. For businesses and SMEs, they offer
lease financing, debt factoring, and business
loans . Additionally, MFLC offers a ‘Green Loan’,
which is a product that is specifically designed
to accommodate environmentally sustainable
activities.
For more info, visit https://www.mflc.mv/

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Housing Development Finance

Corporation (HDFC)
HDFC is distinctive as the only mortgage
housing institution in the Maldives. The
institution offers both conventional and Islamic
housing finance facilities. These offers are
presented in the form of Home Purchase &
Construction Loans, Home Improvement Loan,
and Financial Lease.
For more info, visit https://www.hdfc.com.mv/
Maldives Stock Exchange (MSE)

The primary function of the Maldives Stock
Exchange is to facilitate local companies to
raise capital through the issue and trade of
securities. Additionally, MSE has established a
Private Securities Segment created under the
Regulation on Issuance of Securities of CMDA.
To facilitate this segment, the Viyana Portal
was instituted, which allows the sale of debt
securities to SMEs. The Viyana portal acts as
a centralized and transparent platform where
both private and institutional investors can
invest in your business. To issue debt securities,
SMEs should register online via the Viyana
portal, appoint a representative, and create
an offer. It should be noted that to issue debt
securities, a placement fee and annual listing
fee is charged.
For more info, visit https://viyana.mv/
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4.4 Summary of Financing In the previous section, we have provided you with an overview of
Facilities Available financing sources available for MSMEs in Maldives. This section will
provide you with a summary of these options.
Bank Loans Trade

Asset Acquisition & Leasing Debt Factoring Overdraft
Working Capital Financing
# Bank Development
Vessel Financing Loan
Working Capital Loan Guest House Loan
Real Estate Loan Yes _ _
1 BML Yes
Green Loan
Retailers Loan
Business Development Loan
General Asset Financing
MIB Yes Asset _ _
2 Vessel Financing
Project Financing Refinancing
Working Capital Loan Mortgage Term Loan

3 SBI Project Term Loan Yes _ _ Yes
Loan Against Deposits

Asset Financing Yes _ _ Yes
4 BOC Project Financing
Asset Financing
MCB Working Capital Loan Project Financing Yes _ _ Yes
5
Term Loan
Short Term Loan Term Loan Yes _ _ Yes
6 CBM
Women Entrepreneur Loan
HBL Women Entrepreneur Loan Term Loan Yes _ _ Yes
7
Offers a number of loan options specifically _ _ _
8 SDFC _
targeted towards SMEs *
Fahi Business Loan _ Finance Lease and Yes _
9 MFLC
Green Loan Sale & Leaseback
Home Construction &
Purchase
HDFC Purchase of Land & _ _ _
10 Lease Buyout
Construction
Home Renovation
Home Improvement
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4.5 Standard Documents

Required When Applying
for Business Loans
Business loans are one of the most sought-after financing options for
MSMEs, especially for startups that need capital to get their businesses
off the ground. In this section we will cover the standard documents
required when applying for business loans. These documents can be
categorized into (1) Identification Verification Documents, (2) Income
Verification Documents, (3) Project/Investment Related Documents,
and (4) Collateral Related Documents.
Identification Documents: can include business details, owner

details, contact details, and ID card copy for unregistered businesses.
For registered businesses, can include the following documents,
depending on the type of business (legal entity).
Business Details and Business Contact Details
Business Registration Number & copy of Business Registration
Copy of Memorandum of Association and Articles of Association
Board Resolution for the Company/Partnership stating the

authorized signatory on behalf of the business
ID Card Copy of Shareholders/Directors of the Company/

Partnership

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Income Verification Documents: includes the Bank Account

Statement of owner(s)/shareholders/partners for a given period
depending on the type of business. Additionally, this can also other
income verification documents such as rental agreements & letters
depending on the application.
Project/Investment Related Documents: can differ based on the

loan purpose but can generally include business plans, project/
investment breakdowns, timelines, financial forecasts, etc.
Collateral Related Documents: compulsory if collateral is required

for the loan. This can include a registry copy of the collateral, and an
ID card copy of the mortgager(s).
4.6 Obtaining a Credit Report

A credit report is a statement that provides an individual’s or
businesses’ credit history such as number of credit facilities taken
and repayment history as well as provides snapshot of current credit
situation. This is one useful report that Businesses can use to obtain
better loan terms and interest rates from lenders especially banks. In
some countries, Businesses with good credit reports are more likely
to participate in government projects and obtain lower business
insurance rates.
Importance of Credit Reports
Vendors will be Financial Good credit

more willing to institutions can history can
provide favorable obtain accurate increase chances
credit terms for data from of getting loans
a business with the report to or credit facility at
good credit history make unbiased favorable terms
decisions in
offering loans
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Maldives Monetary Authority (MMA) established Credit Information

Bureau (CIB) to ease access to finance for individuals and businesses
and support financial institutions in taking informed credit decisions.
The main objective of the Bureau is to serve as a one-stop repository
of credit information and provide Credit Information Reports (CIR)
composed by the CIB provide insights into the company’s financial
health and history, allowing members of the bureau to evaluate a
company’s credit worthiness. Additionally, CIB also provides Self-
inquiry Reports whereby an individual can request for their own credit
report, which they can submit to other institutions to demonstrate
their creditworthiness.
To obtain a credit report you can visit the Credit Information Bureau
website and request a self-inquiry report. As an SME you will need to
provide the following details when requesting a credit report.
Entity Name
Registration No.
Registration Date
Contact Details
Copy of Company/Partnership Registration Certificate
Board Resolution for Authorization to Collect Self-Inquiry Report
ID Card Copy of Directors Signed in the Board Resolution
Company Profile from Ministry of Economic Development
To request for a credit report or for more info,

visit https://cib.gov.mv/

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4.7 Taxation
Taxation is the process of collecting money from individuals and
businesses by the government. The government uses the money
it collects from taxes to support the needs of the country and its
citizens. Taxes are fund public services such as schools, hospitals,
roads, and security. Taxes help ensure that everyone contributes to
the functioning of society and the provision of essential services.
Disclaimer: The information provided in this book regarding taxation is

for general informational purposes only and should not be considered as
professional tax advice. Tax laws and regulations are subject to change, and
the application of tax rules can vary based on individual circumstances. It is
recommended that readers visit the official website of the Maldives Inland
Revenue Authority (MIRA) for the most up-to-date and accurate information
on taxation.
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There are 3 main types of taxation in Maldives. These are
Income Tax,
Goods & Services Tax (GST), and
Other Taxes & Fees.
In this volume, we will only be looking into Income Tax & Goods &
Services Tax. The MIRA website contains tax guides, interactive
guides, and instruction sheets for both Income Tax & GST.
What is a tax return?
A tax return is a form that individuals, businesses, or other

entities submit to the government to report their income,
expenses, and other relevant information for the purpose of
calculating and paying taxes. It is typically filed annually and
provides detailed information about the taxpayer’s financial
activities during a specific tax year.
Filing a tax return is an important responsibility for taxpayers

to ensure compliance with tax laws and regulations and to
accurately report their financial information to the government.
It helps determine the correct amount of tax owed and
facilitates the assessment of any refunds or credits that the
taxpayer may be eligible for.

79
4.7.1 Income Tax

Income tax applies to all tax residents of Maldives. You are a tax
resident of Maldives if any one of the following situations applies to
you.
Your permanent place of living is in the Maldives;
You are present, or you intend to be present in the Maldives

for more than 183 days in any 12-month period commencing
or ending in a tax year [183-day rule];
You are an employee or an official of the Government of the

Maldives posted overseas during a tax year.
It should be noted that residents of the Maldives are taxed on their

worldwide income, whereas non-residents and temporary residents
are taxed on the income derived from the Maldives only.
Income Tax can be personal or corporate. In this book we will be

focusing on corporate income tax. However, it should be noted that
for sole proprietorships, personal income and business income are
regarded as the same.
As an SME, whether you operate as a sole proprietorship, partnership,

or a company, you are required to register for taxation. However, if
your business is already registered with MED as we have discussed in
Chapter 2, there is no need to submit a separate registration.
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Generally, all types of income earned by an individual/company

are subject to income tax. This can include, but is not limited
to remuneration, business income, rental income, capital gains,
dividends, interest, royalty, commissions, etc. However, there are also
some types of income that are exempt from income tax. This can
include income received from grants & scholarships, wedding gifts,
etc. For a complete list of the types of taxable and exempt incomes,
you can visit the MIRA website.
Whether you should file an income tax return can depend on a

variety of factors such as type of legal entity, taxable income, gross
income etc. If you are required to file a tax return and do not, in
accordance with the Tax Administration Act, penalty fines for failure
to file returns and/or pay taxes can be applied. Hence, we would
recommend visiting the MIRA website and using their interactive
guide income tax return.
4.7.2 Goods & Service Tax (GST)

Goods & Service Tax (GST) is a consumption-based tax system
that is designed to be imposed on the final consumer. GST can be
charged only after registering and must be charged on all goods
and services other than zero-rated and exempt goods and services.
In general, GST exempt items include essential goods, export goods
and services, and other items of concern. To check the full list of
zero-rated goods and services, you can visit the MIRA website. GST
serves as a replacement of multiple layers of indirect taxes, such as
sales tax, service tax, excise duty, and others.

81
Output tax and Input tax
Output tax Input tax
GST charged to your GST paid on your

customers for goods business purchases
and services you sell (eg. Local purchases
or imported goods)
Output tax - Input tax = Net GST
Net GST
Basic GST process
To check if you are required to register for GST, you can visit MIRA
website and follow their interactive guide on GST registration. The
website also provides a GST fine calculator and GST lookup services.
For more info, visit https://www.mira.gov.mv/
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4.8 Consultation & Advisory

Services
Do you face any difficulties in obtaining the expertise and knowledge
to drive your SME? Do you need assistance in making business
plans, obtaining funds, or managing risks for your SME? Providing
consultancy service is one of BCC’s core functions and currently we
have provided consultation services to over 4,000 MSMEs. If your
business needs any assistance, we can provide you with tailored
solutions for your needs. Moreover, we provide consultation services
free of charge.
BCC provides consultation and advisory services regarding the

following:
Business Registration
Other Registrations (such as Customs & Industry

Specific Registrations)
Projects & Initiatives by BCC
Business Dissolution & Deregistration
Foreign Employment
Loan Applications
Taxation
Business Planning
Operations

83
Consultancy services
are available from every
location where BCC has
established Business
Centers. These locations
are listed below.
HA. Dhidhdhoo
HA. Ihavandhoo
HDh. Kulhudhuffushi
N. Manadhoo
Lh. Naifaru
Male’ City
AA. Thoddoo
Dh. Kudahuvadhoo
L. Gan
GDh. Thinadhoo
GA. Villingili
Gn. Fuvahmulah
S. Hithadhoo
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To book a consultation with us, you follow the following steps.
1. Visit our website at https://bcc.mv/
2. Click the ‘what we do’ tab from the navigation menu
3. Click ‘Consultation & Advisory Services’ or scroll down to the

‘Consultation & Advisory Services’ section.
3. Press ‘Book a Consultation’.

85
4. Select a Business Center of your choice (we haves Regional

Business Centers certain islands covering all atolls in Maldives),
select a preferred booking date, and press Next.
5. Enter your name, email, contact number, and press Next.
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6. Select your Primary Inquiry and Secondary Inquiry (optional). This

page also provides you with an overview of your booking details.
Verify whether this information is correct and then, press Submit.
7. Congratulations. Now you have booked a consultation with us. We

will contact you regarding the consultation and arrange a session
for you at your convenience. The session can be online or preferably,
in person. We will be working closely with you to understand your
specific needs and objectives, provide you with a customized
solution that meets your requirements.

87
4.9 Other Resources

Listed below are some other resources that can assist you in driving
your SME to success.
Instructional Videos for New Entrepreneurs:

As a newly registered entrepreneur, you may need some assistance
getting started. We have prepared a set of instructional videos that
can assist you regarding this.
https://bcc.mv/#videos
Collaborate with BCC:

Interested in joining us? You can become a mentor to share your
guidance with other MSMEs, find new innovative startups, or register
in BCC’s business listing to make your business more visible to other
investors.
https://bcc.mv/#register_withus
Follow Us:
We regularly share valuable insights, exclusive content and
opportunities targeted for MSMEs. By following us, you can have
access to a wealth of resources that can help you grow and succeed.
bccmv
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Conclusion
Throughout the book, we have covered essential topics such as
understanding SMEs, the registration process, goal setting, and
financing options for your SME. By looking into these key areas, we aim
to empower readers with the knowledge and tools necessary to start
on their SME journey with confidence. Remember, success in the SME
world requires a solid foundation built upon knowledge, planning, and
adaptability. As you continue on your entrepreneurial path, this book
will serve as a valuable guide for your SME’s growth and prosperity.
The next volume of the SME Book will be Volume 2 – Registrations. In

Volume 2, we will dive deeper into the details of business registrations,
guiding you through the process and sharing valuable tips and resources.
Stay tuned for Volume 2 as we continue our journey to empower and
support SMEs on the path to success.
Best of luck with your entrepreneurial endeavors!

89
References
Bank of Ceylon. (2023). Products and Services. Retrieved from Bank of
Ceylon: https://www.bocmale.com.mv/our-services/
Bank of Maldives. (2023). Business Loans. Retrieved from Bank of

Maldives: https://www.bankofmaldives.com.mv/business/loans
Barrow, C., Barrow, P., & Brown, R. (2008). The Business Plan Workbook:
The Definitive Guide to Researching, Writing Up and Presenting a
Winning Plan (6th Edition). London: Kogan Page.
Business Center Corporation. (2023). Retrieved from Business Center

Corporation: https://bcc.mv/
Campbell, D., Stonehouse, G., & Houston, B. (2002). Management

Bundle: Business Strategy, Second Edition. UK: Butterworth-Heinemann.
Commercial Bank of Maldives. (2023). Retrieved from Commercial Bank

of Maldives: https://www.cbmmv.com/
Habib Bank. (2023). Contact Us. Retrieved from Habib Bank: https://
www.hbl.com/maldives/contact-us
Housing Development Finance Corporation. (2023). Retrieved from

HDFC: https://www.hdfc.com.mv/
How to Prepare a Business Plan: Create Your Strategy; Forecast Your

Finances; Produce That Persuasive Plan (Business Success), Fifth Edition.
(2011). London: Kogan Page Limited.
Lynch, R. (2015). Strategic Management (7th Edition). UK: Person.
Maldives Finance and Leasing Company Pvt Ltd. (2023). Corporate

Finance Products. Retrieved from Maldives Finance and Leasing
Company: https://www.mflc.mv/corporatefinance
Maldives Inland Revenue Authority. (2023). Maldives Inland Revenue

Authority. Retrieved from https://www.mira.gov.mv/
Maldives Islamic Bank PLC. (2023). Financing for Businesses. Retrieved

from Maldives Islamic Bank: https://www.mib.com.mv/
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Maldives Stock Exchange Pvt Ltd. (2023). Private Securities Segment

Bringing together Investors and Companies. Retrieved from Viyana:
https://viyana.mv/
MCB Maldives. (2023). Corporate Banking Helping you expand horizons.

Retrieved from MCB Maldives: https://www.mcbmaldives.com/en/
corporate/
Ministry of Economic Development. (2023). Laws & Regulations. Retrieved

from Ministry of Economic Development: https://www.trade.gov.mv/
laws-regulations
Ministry of Economic Development. (2023). Welcome to Business Portal.

Retrieved from Business Portal: https://business.egov.mv/
SME Development Finance Corporation. (2023). Financing Options.

Retrieved from SME Development Finance Corporation : https://sdfc.
mv/
Viyana. (2023). Private Securities Segment. Retrieved from https://

mse-misc.s3.ap-southeast-1.amazonaws.com/moonsinger/misc/
downloads/Viyana+-+Find+out+more.pdf

Discover the path to entrepreneurial success
with the SME Handbook, a comprehensive
guide designed to empower and equip
SMEs at every stage of their journey.
Volume 1 of the SME Handbook unveils the essential steps for

starting and growing your own business. Gain invaluable insights
into the classification of SMEs, understand the registration
process, explore financing options, and pave the path for your
SME to success.
The SME Handbook is an initiative of the Ministry of Economic

Development and is authored by Business Center Corporation
(BCC) in collaboration with the United Nations Development
Programme (UNDP) in the Maldives with the generous
contribution of the Government of Japan. This handbook is a
testament to their commitment to supporting the growth and
development of SMEs in Maldives. Get inspired and equipped
with the knowledge to build a sustainable, innovative, and
successful business with the SME Handbook Vol. 1 - Introductions.
ISBN 978-99915-57-42-7

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Limit of Liability/Disclaimer of Warranty: While we have diligently prepared

the SME Handbook to provide valuable guidance to the reader, we do not

Copyright © 2023 by Business Center Corporation

The information in this book is up to date as of 10 August 2023

The SME Handbook is an initiative of the Ministry of Economic

Mission Statement of BCC

SME Handbook | Volume 1

Consulting & Advisory Services

SME Handbook | Volume 1

1.1 What is an SME?

1.2 Classification of SMEs

While the term SME is widely acknowledged and often well

1.2.2 Classification of SMEs in Maldives

Number of Total Annual Total Net Profit

Additionally, the classification of SMEs in the Maldives is also defined

Number of Total Annual Total Net Profit

SME Handbook | Volume 1

If a business exceeds any one of the boundaries set by a category,

The word ‘registration’ in this context refers to creating an official

2.1 Overview of the SME

Chapter 2 | Business & SME Registration

2.2 Importance of Completing

Establishing Credibility: Registering your business gives

Protecting Your Business Name: Registering your business

Access to Funding: Numerous funding sources are only

Access to SME Only Initiatives: There are numerous

SME Handbook | Volume 1

Formalizing your business: Registering your business can

Note: Two Different Types of Registration.

There are two different types of registrations, SME Registration

2.3 Choosing a Type of Business

Sole General Limited Liability Private Limited

Chapter 2 | Business & SME Registration

As part of understanding the types and the differences between

A, B and C are Personally Liable for MVR 250,000

Equity of A and B does not

SME Handbook | Volume 1

For instance, if a sole proprietorship owes one of their suppliers a

Chapter 2 | Business & SME Registration

We will explore the concept of liabilities more in the next volume of

Provided below are the differences between the identified legal

Limited Liability Partnership

Private Limited Company

SME Handbook | Volume 1

Liability Type Unlimited Unlimited Limited Limited

Annual Fee 10-year MVR 2000 MVR 2000 MVR 2000

Type of Natural Natural Natural & Natural &

Note: Natural vs Legal Shareholders

A shareholder can be either a natural person or a legal

Chapter 2 | Business & SME Registration

2.4 The Registration Process

2.4.1 Registering your eFaas Account

Visit the Ministry of Economic Development at

Note: The Business Portal is a platform by Ministry of Economic

The Business Portal is an online platform by the Ministry of Economic

SME Handbook | Volume 1

National ID Card Number A Passphrase

ID Card Serial Mobile Number

Register efaas at https://efaas.egov.mv/