Kuwaiti lenders look to China to help finance projects

27 November 2014

Local lenders say new approaches needed to provide funding for $160bn project pipeline

Kuwaiti lenders are looking to China to help provide project financing for future projects, saying local banks will struggle to finance the country’s $160bn project pipeline.

“Local banking may not be able to absorb this,” said Tat Thong Tan, general manager of Strategy and Planning at Commercial Bank of Kuwait, speaking to the MEED Kuwait Projects Conference.

“We’re calling for tie-ups with Chinese banks, as Chinese EPC [Engineering, Procurement and Construction] contractors come forward.”

Cooperation between local lenders and the EXIM Bank of China, a state owned bank chartered to promote the export of Chinese products and services, is one option the Commercial Bank of Kuwait is looking into, according to Tan.

The call for increased cooperation with China comes as Chinese EPC contractors look to play an increasing role in the country’s project market.

Local banks have a total capitalisation of KD8.2bn ($28.15bn), according to Commercial Bank of Kuwait figures.

“Due to the lack of capitalisation we are not going to be able to fund everything on our own,” said Tan. “There have been attempts to expand the capital base, but with Basel III this has been complicated.”

Cooperation between local banks will go some way towards providing financing for upcoming projects, but it will not be enough by itself according to Kuwait’s lenders, which say that new ways of lending are needed to provide sufficient financing.

“The entire universe of banks would have a role as well as venture capitalists,” said Tan, who added that sovereign wealth funds, international banks and sharia compliant entities could provide finance for Kuwait’s project market.

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