Interview: Abdulaziz bin Nasser Al Khalifa
In what way is financing to SMEs being affected by tightening liquidity in the banking sector?
ABDULAZIZ BIN NASSER AL KHALIFA: With respect to SMEs, tightening liquidity in the banking sector creates particularly severe pressure, as it restricts their access to finance. Naturally, financial institutions – both locally in Qatar and regionally across the GCC – seek to minimise risks associated with lending, and therefore, they have become increasingly selective about whom they finance. This is due to tightening liquidity caused by plunging commodity prices and challenging market dynamics.
Nevertheless, our survey of local commercial banks revealed a very healthy application approval ratio of 78%. Moreover, at QDB we recognise that in the long run, and with the right support, SMEs could become the primary drivers of our economy and boost exports. Therefore, our team makes decisions based on the long-term potential that SMEs hold for our economy and look, wherever possible, beyond short-term economic effects of tightening liquidity.
How can the risk of lending to SMEs be better mitigated by the banking sector?
AL KHALIFA: To better mitigate the inherent and emerging risks of lending to SMEs, we have adapted our criteria for funding eligibility. For example, we now only extend financing for raw materials to SMEs with pre-existing contracts with clients, thus improving the chances of loan repayment. Further measures include monitoring our existing loans more closely in order to identify problems before they arise, as well as categorising our existing clients in an appropriate manner. This helps our front office better manage them and their unique requirements. Lastly, in spite of our risk mitigation measures, we remain aware that in many cases we may be the lender of last resort for entrepreneurs, and therefore, we try our best to structure financing arrangements that are beneficial both for us and the SMEs we endeavour to support. In doing so, we aspire to create maximum flexibility within the existing framework of rules and regulations.
In which sectors are SMEs performing better, and how can this be measured?
AL KHALIFA: At QDB, we follow an evidence-based policymaking approach for our SME development initiatives and funding programmes, conducting regular sector analyses and studies. In doing so, we assess the current condition of the market players – their profitability, number of operators, market demand and future prospects – giving us a more accurate sense of their expected performance.
Presently, the infrastructure development sector, as well as the food and beverage, tourism and health care industries, is proving to be particularly fertile for SMEs. In our experience, however, the success of SMEs is highly dependent upon the leadership skills of their management.
In what ways has an entrepreneurial ecosystem and mindset developed in Qatar, and how can international partners support this?
AL KHALIFA: The SME ecosystem is rapidly taking root and developing across Qatar, evident not only in the growing number of SMEs catering to this growth, but also organisations specialising in entrepreneurial development. For example, SMEs may now make use of the resources offered through the Qatar Business Incubation Centre and the Bedaya centre (both subsidiaries of QDB), as well as Qatar Science and Technology Park. For our part, we cooperate continuously with various partner organisations in order to cultivate an environment conducive to SME growth. Our efforts stem from the belief that we must harness our collective resources to achieve extraordinary successes for SMEs in the country.
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