SME access to finance still limited in Middle East

17 November 2014

Regional banks remain wary of lending to smaller companies, conference told

Small and medium-sized businesses in the Middle East are still struggling to access finance from the banking sector, say panellists speaking at an industry conference in Dubai.

Banks in the region remain wary of lending to smaller companies that lack the depth of financial and credit information that larger corporates have, and often charge high rates of interest on loans to compensate.

“There is no justification for such high pricing,” said Hashim Shawa, chairman and general manager at Bank of Palestine, speaking at The Middle East Banking Forum on 17 November. “The non-performing loan (NPL) levels are acceptable,” he said.

He said that banks which want to increase their focus on SME finance need to invest in staff and the local communities that they want to support.

James Gohary, regional manager, financial institutions group, Mena and Turkey at the World Bank said that banks need to rethink their SME strategy.

“There is a misconception that SME finance is not profitable. It can be profitable, but it takes imagination and a little bit of focus,” he said.

He said that the use of private equity rather than traditional term loans could be a viable way to help fund SMEs’ growth.

“Private equity is feasibly a way to go forward. Can banks step into that role,” he asks, suggesting that banks could consider funding entities that then provide capital to SMEs.

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