Interview: Andre Sayegh
How can banks encourage the development of small and medium-sized enterprises (SMEs)?
ANDRE SAYEGH: There is a unique personal quality in this part of the world, which is that people are entrepreneurial by nature. There are currently over 350,000 SMEs operating within the UAE, which represents 92% of the total number of companies. This equates to more than 86% of jobs in the private sector and 60% of the country’s GDP, representing a significant contribution to the UAE’s overall economy.
Historically SMEs have limited access to financial support from banks and financial institutions, and this has forced many business owners to borrow money from family and friends. SMEs account for just 4% of total lending in the country, and as a local bank we have a responsibility to support them. We have an obligation to encourage the development of start-ups as they evolve into medium-sized enterprises and large corporations. Financial institutions need to do their part to ensure this goal is achieved by providing a range of financial solutions, including credit facilities, business current accounts, business credit cards, and overdraft facilities that allow SMEs who have a solid business plan and professional managerial expertise to access support in the early stages of development, even as they focus on their core competencies. Utilising these types of products, customers who meet the SME credit criteria can benefit from an unsecured or partially secured facility which will help them to meet short-term cash flow operating requirements at reasonable rates. Facilitating access to finance for SMEs is essential for fostering economic growth in the UAE, and supporting small businesses is a central priority for both government entities as well as lenders.
Will the anticipated lower levels of liquidity in 2016 have an impact on economic growth?
SAYEGH: Commenting on liquidity, I would like to clarify that the financial sector in the UAE has always been liquid. However, the noise on lower liquidity has to be put in the right context. Facts are that the financial sector is now at the “normal and correct liquidity level” while in the recent past there was excessive liquidity. The market in the UAE is very dynamic, and net interest margins adjust accordingly. It is all about adaptability, diversification and identifying bankable opportunities. Business opportunities always exist regardless of what stage in the economic growth curve we are in. The market reality is that the UAE has very strong fundamentals.
Actually, we are witnessing a major shift in the use of oil. Beyond being simply a source of energy, oil is becoming an added-value commodity, it is being utilised more and more in downstream industries such as petrochemicals and refined products, and it is helping the proliferation of a solid and sustainable manufacturing base. Additionally, the UAE’s outstanding quality infrastructure, coupled with its close proximity to key markets in Asia, Africa and Europe, offers the country incredible advantages. These factors, combined with a no tax environment and the country’s stable political and regulatory background, should ensure that the UAE continues to attract investors from all over the world.
What are some of the key enablers needed to ensure continued economic growth?
SAYEGH: One of the key factors for spurring economic growth that has emerged over the last few years is the efficiency of the payments system. This is extremely important because the money supply, combined with the speed at which money circulates and moves hands, created growth in the country’s GDP which ensures prosperity. As it stands right now, the country is recycling money through the system many times over compared to the past, which is leading to greater prosperity. However, there are still further improvements that can be made in this area.
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