The volume of syndicated loans closed in the Middle East and North Africa (Mena) region during the first three months of 2014 is the lowest recorded in the past decade as companies reassess their funding requirements.

A total of $7.2bn syndicated loans were closed in the first quarter of this year, marking the lowest quarterly volume recorded since 2004, when just $4.12bn loans were signed in the fourth quarter of that year, according to the latest data from UK-based data provider Dealogic.

The volume of loans also declined by 57 per cent compared with the first quarter in 2013, when a total of $16.69bn-worth of loans were closed.

The quarterly results could be a sign of a reversal in the growth trend seen in the region’s syndicated loan market.

In 2013, a total of $68.36bn-worth of loans were signed, the highest recorded since 2008.

The fall in lending has been argued as the result of companies reassessing their borrowing requirements, potentially considering issuing bonds or sukuk (Islamic bonds) instead of loans with the current market offering favourable pricing.

The slowdown in emerging market growth could also see borrowers increasingly concerned with reducing or refinancing existing debt rather than raising new debt. 

During the first quarter, UAE-based industrial conglomerate Al-Ghurair Investment raised a AED1.3bn ($354m) syndicated loan to refinance existing debt obligations originally raised in 2009.

Similarly, Commercial Bank of Qatar raised a $1bn syndicated loan that will be used to refinance existing debt, as well as fund business growth.

Yet, analysts are not yet worried that the decline is a sign of a stagnating market, saying credit growth in the region will continue to be healthy.

Timucin Engin, associate director, financial services ratings from US-based rating agency Standard & Poor’s (S&P), based in Dubai says he anticipates credit growth in the Gulf’s banking sector will remain strong.

“Across the region it is a bit of a mixed bag. Some countries are increasing lending, others are seeing a slight slowdown but overall there is healthy credit growth,” he tells MEED.

After a slowdown in lending in Qatar last year, Engin predicts “recovery and stronger growth”, while in the UAE he expects bank credit growth to increase by 10-12 per cent on last year.

The regional decline in syndicated loans to date this year reflects wider market trends, with global syndicated loans falling by 12 per cent in the first three months of this year compared to the same period last year.

A total of $861.6bn loans were closed in the first quarter 2014 compared with $975.4bn in the same period of 2013.

Global volumes for the first quarter this year are still higher than those recorded in the first quarter of 2012 when $800.9bn loans were signed.

The global syndicated loan market plummeted in 2008 when the banking crisis drove up borrowing costs and dried up liquidity. Many loans were postponed or restructured in the subsequent years.