Interview: Ahmed Al Naqbi
How do you assess the progress of economic diversification, and how can the banking sector capitalise on such progress to generate growth?
AHMED AL NAQBI: The UAE has a diversification programme to transform the economy from its traditional reliance on oil and gas to one based on knowledge, technology and skilled labour. While many economies expand vertically, building on what they have been producing for years, the UAE is rapidly developing and investing in sectors where it has no natural resources. Therefore, there is a strong focus on scientific research, logistics, health care, food security and renewable energy. With the government’s backing, creditworthiness and risk management criteria can change drastically. Commercial banks recognise that they can derive many benefits from government-financed projects and initiatives.
To what extent are next-generation technologies disrupting the local banking sector?
AL NAQBI: Technology is evolving not only in our sector, but also across the economy. While the local banking tech infrastructure meets global standards, Emirati banks lag in terms of client-based digital solutions. Domestic banks should be encouraged to enhance competitiveness in this area because international digital banks will eventually enter the market, and potentially undercut our standing and upend local regulations. That being said, there is no immediate concern that financial technology (fintech) companies will replace banks as the former cannot provide the full suite of products and services needed by clients. The optimal solution for fintechs is to partner with banks in order to provide the requisite specialised solutions.
What can be done to support entrepreneurs and the local start-up environment?
AL NAQBI: Start-up funding has been a hurdle for new companies in the UAE because commercial banks have a prudent strategy in terms of lending to such entities. Moreover, the turnaround time on loan applications is lengthy due to the local and international regulations to which commercial banks adhere. EDB is working to address this. Through our partnership with a fintech provider, a start-up can open an account within 24 hours, provided all valid documents are submitted. EDB can offer this service because we conduct business solely in the UAE and operate in the local currency, and hence have the ability to navigate international regulations. The bank also has an initiative whereby if a start-up applies for funding below Dh5m ($1.4m), EDB can guarantee a decision within five days. This helps start-ups manage their burn rate during the process.
In what ways can the banking sector balance profitability with providing affordable and accessible financial services to all segments of society?
AL NAQBI: Banks in the UAE employ various strategies to meet the diverse needs of their customers. Retail banks serve everyone from the underbanked to startups, while corporate banks cater to private clients and large corporations. The channels and methods banks use to serve different segments allow them to balance their profitability targets with the commitment to provide affordable services.
At one end of the spectrum, there are corporate banks that serve private clients and large corporations through personal bankers who are highly skilled and capable of meeting their clients’ sophisticated financial requirements. These services come with a higher per capita cost, which is compensated by increased business volume and substantial margins. The other end of the spectrum features start-ups and underbanked clients. Retail banks are set to move into digital channels to serve these individuals’ needs, as doing so offers scale to ensure such segments are profitable, while keeping costs consistent and reasonable. This should allow banks to have lower per capita costs, which will be reflected in the affordable pricing of services.
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