Expanding SME Lending in the GCC – A Missed Opportunity or Government Hubris?
The World Bank and the Union of Arab Banks have quite recently delivered their most recent review on the situation with bank loaning in the Middle East, which is helpfully part among GCC and non-GCC nations.
One of the discoveries, that solitary 2 percent of bank loaning in the GCC goes to SMEs, has prompted governments across the area by and by approaching banks to accomplish more to help the SME area. However, is it a productive area, and are banks truly passing up a major opportunity by not putting resources into it?
Banks surely assume that putting resources into SMEs is suitable. Most respondents in the GCC, which included 57 banks representing 74 percent of the resources in the area, said that SMEs should represent around 12 percent of their credits as opposed to the current 2 percent. Indeed, practically all banks that loan to SMEs 87 percent have now made devoted SME loaning units.
Most banks in the GCC further affirm that interests in the SME area are made in light of the fact that they present a chance to develop benefits, and that these have little to do with store network selling or market immersion in the corporate market. For sure, numerous banks currently have a wide scope of items obliging the necessities of the SME market; albeit the study gives little data about how much strategically pitching is being accomplished in the area.
By the by, banks stay worried about the dangers engaged with putting resources into fit subsidie. The past overview, led in late 2009 and mid 2010, featured the way that banks are fundamentally worried about the dangers characteristic in the area, and consider SME loaning to be a lot more dangerous than corporate 82 percent or realty loaning 57 percent. Therefore, they depend intensely on guarantee, with 78 percent of banks in the GCC requiring more insurance from SMEs than from bigger organizations or corporate.
Albeit these are quite standard perspectives, there was a high grouping of influence in the corporate and realty markets at that point, so the genuine dangers have likely been exaggerated and should be returned.
Dependence on guarantee, truth be told, stays the greatest test in SME loaning. SMEs regularly prosper in pieces of the economy where restricted beginning up capital is required and is unavoidably security lacking. So except if banks can discover a method of lessening their dependence on guarantee, expanding a lot of loaning in the SME area is probably going to stay past their compass.