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An increased focus on financing small and medium-sized businesses should be another important step towards unleashing the Middle East’s vast untapped reserves of entrepreneurialism. Although rarely easy for risk-conscious lenders, growing the SME book is vital for the region’s future as a banking market. It is something notably lacking in the most oil-dependent economies.
In the UAE, on the other hand, some banks have given a good demonstration of what not to do in SME banking. Market leader ADCB’s growth in SMEs has not been an unconsidered dash for higher yields, as its transaction services franchise shows, although the consensus among analysts is that it too has been caught up in the lending frenzy. It will be interesting to see how this part of ADCB evolves as the market stabilizes.
In Egypt, Bank of Alexandria is working proactively to develop its place in an SME market of huge challenges and opportunity. It was a year of strong growth for its SME loan book in 2016, in part thanks to drastically reduced loan processing periods, now down sometimes to only three days.
Also known as AlexBank, its SME product factory is busy, whether it is export and inventory finance or longer-term credit linked to machinery and vehicle fleets. The lender hopes this will continue as the proportion of SMEs in its loan book more than doubles, and as it boosts financing agreements with multilateral development banks.
Its owner, Intesa Sanpaolo, is based in one of the world’s biggest SME markets, one with some similar institutional challenges to Egypt. But the offering is specific to Egypt, like partnerships and discounts for clients with local phone companies, office suppliers, web developers, accountants and payroll firms. In March, it signed an agreement with the Egyptian Stock Exchange to spur access to its SME market.
Finally, Lebanese banks have high hopes for SME banking, including Bank Audi, which is partnering with the IFC to devise ways to reshape its business to the needs of SME banking in Lebanon and Egypt. In 2011, Blom Bank also created a SME department, helping its Lebanese commercial portfolio rise by around 80% to $1.8 billion.
