SMEs get just 2% of bank loans

An international financial expert has urged Arab banks to raise the ratio of lending to small and medium enterprises (SMEs) in order to revitalise the economic movement in Arab countries which are largely driven by this sector.

According to a study conducted by the Union of Arab Banks in association with the World Bank on ‘SMEs Bank Loans in the Middle East and North Africa’, it has been revealed that the percentage of loans provided by banks to the SMEs does not exceed 8 per cent of total lending operations in Mena region.

The study clearly showed that the share of loans for this type of companies in the GCC does not exceed two per cent, at a time when other companies in the region have a share of 14 per cent.

Zed Ayesh, the General Manager of Flashship Consultancy, commenting on the study, said: "SMEs are not provided funds for many reasons, and therefore they lose great opportunities to boost their market share."

This study covered 139 banks in 16 countries in the Middle East and North Africa (Mena), including six from GCC, and 76 national banks and 34 foreign banks, as well as 29 banks belonging to the state and 110 private banks.

"These companies have enough management and marketing capabilities to enter foreign markets if only they were supported through appropriate loans from the government and private banks," Ayesh added.

"The Arab economies should unify their administrative and economic criteria when dealing with SMEs but the truth is that Arab countries lack the kind of unity seen in Europe or North America.

"Strengthening the relationship which governs between SMEs and the banks is part of the solution to increase the quantum of loans granted to these companies. This will promote their integration with the international financial organizations and create a sense of trust between the two parties.

"The growth of SMEs in the Gulf is dependent on the willingness of banks to financially support these companies.

"Our SMEs are among companies that are playing a pivotal role in accelerating the pace of recovery from the recession. The US, which is the world largest economy, built its economic system through 75 per cent contribution of SME companies.

"The best way to promote the Arab economy is to open new financing plans and to make the credit mechanism easier in addition to strengthening relations between banks and SMEs and enhance transparency of these companies."

The study showed that the factors behind the lack of growth among SMEs are illustrated in the lack for transparency toward these companies and a weak financial infrastructure due to poor insurance provided.

Ayesh said: "The recession has seriously hit large companies, while SMEs have shown stronger immunity, an indication of the critical role these companies can play in strengthening Arab economies."

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