By Diana Milne
Standard Chartered has opened a small to medium business banking centre after its portfolio grew 400%.
Every business needs a helping hand from their bank - and none more so than small to medium enterprises (SMEs).
Dubai's economic boom has created a dramatic growth in the number of SMEs in the emirate and Standard Chartered Bank has seen its SME banking portfolio grow a massive 400% in three years.
Now the bank has set up a centre dedicated specifically to SME banking in the Jebel Ali Free Zone (Jafza).
It believes that the sector is set for further unprecedented growth in the future and plans to launch more products and services aimed specifically at SMEs.
Existing SME banking services it offers include Straight2Bank - an online banking platform for SMEs that can be accessed 24 hours a day.
Sandeep Bose, Standard Chartered's regional head of SME banking for the Middle East and South Asia, explains why he believes SMEs deserve their own dedicated banking centre.
What sort of services will be provided to customers at the new centre?
This SME centre is primarily set up to focus on the SME banking segment. This is a very important segment for us globally and regionally.
It is a centre where SME customers can walk in and get their banking needs serviced. There are relationship managers based there as well as sales and service agents.
And they are all geared up to meet the requirements of the SMEs.
We provide loans to SMEs and those could be for both working capital finance as well as for expansion requirements.
Working capital finance is the finance that businesses need for their day-to-day needs.
Expansion requirements could be for instance, if a company is opening up a new warehouse or factory and needs to buy some new machinery.
On the trade side we provide trade finance for instance, if companies need to issue a letter of credit, open guarantees and so on.
We also provide foreign exchange services for companies who need to be making payments in foreign currencies. There are investment services and products for people who have extra funds and need higher yield deposits.
Finally we also provide customers with payment solutions designed to provide SMEs with better cash management.
Why have you set up a centre dedicated specifically to the needs of SME customers?
SME banking is something we have been working on for a long time and we now have quite a large customer base in that area.
But all this time our sales and relationship management teams have been centralised and providing SME banking services from our main office in Bur Dubai. We wanted to find a way that we could reach closer to our customers.
The new SME banking centre of Standard Chartered is part of our carefully prepared strategy to reach closer to our customer base because if you look at the geography and SMEs - they are based everywhere but a lot of customers are concentrated in Jebel Ali.
How much growth have you seen in SME banking in the UAE?
Standard Chartered Bank has seen its SME customer portfolio grow by over 400%.
If you look at Dubai as a market, it has experienced unprecedented growth in recent years and like most economies in the UAE, SMEs play a huge role in the GDP growth.
If you look at the number of companies here, more than 90% of the businesses in the UAE by definition are SMEs. We have focused on these businesses in the last few years and we have a very clear objective to service this segment.
How much growth are you anticipating in this sector in the next few years?
Our research shows that this market will carry on experiencing growth for the next five years and that the growth will be in double-digit figures. We definitely are increasing our market share.
We are close to around 5% market share now. And we are currently growing our market presence. As of now in the Gulf the UAE definitely is a very strong market. It is possibly the strongest market as we speak, followed by Qatar and Bahrain.
Then we have Bangladesh and Pakistan, which both show a lot of promise. But in the Gulf, the UAE is definitely the one to watch for now.
How competitive is the SME banking sector in the UAE?
The sector has become extremely competitive in the past year or so. Practically every bank has SME in it. We believe we have had a couple of advantages over our competitors though.
One is an early start in the market. But also the fact that as a bank we have such strong experience of SME banking in other countries.
We have a proven model which has been established across the globe and we have a presence in SME banking in around 28 countries across the world.
And it is what we have learnt from all of those countries that we bring to the table in the UAE market today.
So, yes, the market is very competitive but we have quite a few unique propositions, which should help us to gain market share.
Is it easy for companies here to get start-up loans to start businesses in the UAE?
We give loans to companies to start up but typically those loans are generally secured - as in the customer does provide collateral or security for providing those loans.
And for loans that are not secured typically we look at a company having at least two to three years or trade history before we would provide them with any sort of financing.
This could be proven by their financials - or we have credit structures where we look at the bank statements and the trade worthiness of the enterprise. A typical start-up here would find it difficult to generate bank finance.
Initially they would start with their own finance.
And it is only after establishing a business track record of two to three years that the banks would come in with multiples of finance.
A start-up would find it difficult to get there without security. So if a customer wants money - he may have investments or his money tied up in another form. Typically if a European customer comes here and sets up a business he possibly has some banking arrangements in his home country which he could use as collateral.
Why is it the case that start-up companies in the UAE may find it difficult to secure bank financing?
It's a young market and the government is still working on developing organisations like the credit checking bureau.
In some more mature markets like the European market banks can prove businesses's credit worthiness more easily. But here the market is still maturing.
What sort of SMEs does Standard Chartered provide products and services to?
If you look at this market around 80% of the market are traders.
The UAE and Dubai particularly is a trading hub for the Gulf as well as North Africa and Asia.
And a lot of the traders in Dubai are in the business of importing and exporting goods.
The remaining SMEs tend to be servicing or manufacturing units.
Traders' requirements include trade finance, foreign exchange, trade services, cash management, foreign exchange as well as payment solutions.
The goods they are trading could be anything from electronics to textiles. We even have customers who deal with paper pulp which supplies to news print.
This is a regional hub for wholesale trade so the SME companies span across all sectors.
What would you say is the future for SME banking in the region?
I think that as the market matures and the credit bureau comes in and the market matures you will start seeing banks getting a lot easier to give credit to a good customer base. You will see this market in the SME space getting far more mature and competitive. All the banks will try to ensure they give their best to the customers to retain their position. From Standard Chartered's perspective there are definitely plans to expand so watch this space.