Middle East not attracting enough non-traditional pools of liquidity, say banks and companies
A deeper regional bond market is vital to help fund huge infrastructure projects, regional bankers and companies said at Sibos, an annual finance conference held in Dubai.
Companies are increasingly forced to look to funding sources beyond traditional bank financing, as new regulation, such as Basel III, is making it more expensive for international banks to deploy their own capital.
Globally, debt capital markets account for less than 10 per cent of the total funding pool worldwide and that is even less in the Middle East. The challenge is not the economic case to support [projects], but how to introduce new pools of liquidity. We need to be introducing debt capital markets, bond markets, into that mix, said Jonathan Robinson, Middle East and North Africa (Mena) head of project finance at the UKs HSBC Bank.
It is important to grow a regulatory framework around capital markets. In the region, these are in their relative infancy, and weve only just seen the first project bond, he added.
Creating local liquidity through a deeper bond market is crucial to help small and medium-size enterprises (SMEs) get funding, added James Finucane, project finance manager at Emirates Steel, a subsidiary of Abu Dhabi-government owned General Holding Corporation (Senaat).
Government-backed entities are attracting a lot of liquidity, but that is not sustainable if our customers are not getting funded. There should be a role for government enterprises in creating mature debt capital markets and finding ways through the bond and sukuk markets, he said, before urging bankers to educate shareholders on bond issues.
Imran Saeed, head of trade finance advisory and country head, finance, at Siemens UAE, added that companies will also need to come up with innovative financing schemes themselves to satisfy customer needs.