Emirates NBD has claimed that banks are ‘at the front seat’ of every government initiative for SMEs, according to its executive vice president.
When asked about the lack of bank support towards SMEs in the MENA region at the Arabian Business StartUp Academy in December, Tariq Bin Hendi blamed external regulatory elements for limiting financial institutions in aiding small and medium businesses.
The region’s SME credit gap remains in excess of $260 billion. In 2017, the Arab Monetary Fund (AMF) urged banks to help fill the 300 percent gap, with only one in five SMEs in the region having access to a loan or line of credit.
“We are trying to do this, but you can’t avoid the external regulatory environment we have to deal with here from a dollar clearing perspective, which hinders a lot of regulators and banks from doing things,” Bin Hendi said.
“Bounced cheques, for example, are not a bank imposed regulation. That is a regulator saying you have to do this, because in the past, there has been a substantial amount of fraud come through this region on the back of bounced cheques,” he added.
Other banks, however, have openly admitted to being hesitant when it comes to SME lending. At a conference for the 2018 Sharjah Entrepreneurship Festival in October, Najla Al Midfa, a board member at United Arab Bank, told Arabian Business she has seen banks “burnt” by SMEs in the region.
“There is a huge credit gap there, and the government is definitely focusing on it. The central bank is talking about more lending to SMEs. But banks are hesitant, so I think we’ll have to find that middle ground where banks get comfortable with that,” she said.
Institutions such as Mashreq Bank in 2017 argued that its SME loss rate stood too high at 20 percent.
But Al Midfa, who is also the CEO of Sharjah Entrepreneurship Centre (Sheraa), said the sector would undoubtedly need more bank lending to grow, with SME bank lending in MENA being among the lowest in the world.
Wamda Capital managing director Khaled Talhouni, who was also present at the academy, said the region is home to great businesses which “should get access to debt but can’t because they’re under five years old or can’t give a personal guarantee,” adding that the region trails the rest of the world in terms of SME funding and need to "catch up.”For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
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