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Colin Fraser, group head of wholesale banking at Abu Dhabi Commercial Bank, explains how maintaining its commitment to small and medium-sized business lending has enabled the bank to gain market share in the face of difficult economic conditions.


Colin Fraser, group head of wholesale banking at Abu Dhabi Commercial Bank The economic climate in the UAE has been challenging for the past few years. Growth has slowed since 2015 on the back of the decline in the price of oil and a downturn in the real estate market, which has had a significant impact on employment among smaller businesses in particular. This sector has been stressed by developments in the wider economy, as well as other issues that have caused problems across the supply chain. The result was that providers of finance to these businesses suffered as companies collapsed and defaulted. Since these companies tend to be multi-banked, it has been difficult to organize a coordinated creditor response.

Non-performing loans and credit impairments to those types of companies rose sharply during 2015 and 2016, which encouraged many banks and finance companies to withdraw lending to this segment of the market – particularly providers of unstructured and unsecured credit.

However, at Abu Dhabi Commercial Bank we recognize that this section of the market is the lifeblood of the economy outside the oil industry. We therefore made a conscious decision not to withdraw from lending to small and medium-sized companies.

Our approach is that we never lend to a business based purely on credit scoring; we always have a relationship manager to work with the client and make an assessment. We also try to provide credit in a way that suits the clients’ needs, so rather than lending only on the basis of an overdraft or loan we offer other products such as trade finance, working capital and invoice finance. This enables us to maintain a balanced portfolio of credit.

The duration of credit provided tends to be shorter because we are not financing projects that might take more than a decade to reach maturity, which means the repayment on these portfolios is material. If we stopped lending tomorrow, I would expect about one third of the outstanding portfolios to revolve or repay within a 12-month period (except for real estate term loans).

We have also invested heavily in digital technology. Around 60% of documentary trade is now digital rather than paper-based and 90% of all activity conducted by corporate and institutional clients is digital and straight-through. Our award-winning cash management proposition provides the perfect solution to small and medium clients for managing their liquidity and cash flows. This is further supported by offering customized treasury solutions for hedging interest rates and currency exchange risks. 

Our focus has been on getting the service model right and maintaining provision of finance, an approach that has been well received by clients. Our net promoter scores are very high and we analyze client feedback very carefully.

We don’t believe that any other provider of finance has come near to maintaining the level of liquidity we have provided to small and medium-sized companies over the last four years. This has positioned us as the country’s largest provider of credit to this segment of the market while maintaining a low cost of risk.

In terms of risk management, we have made some adjustments to how we allocate our portfolio, with greater use of collateral-backed credit. We haven’t changed our product configuration or terms and conditions, although the latter has always been very tightly managed since we don’t do business on loose documentation.

One of the key factors in our success is that we have always believed in providing need-based credit, backed by cash flows, and only with relationship managers in place to serve clients. The relationship managers are well trained and experienced and make credit-related calls to every customer with borrowing.

Other institutions are more lax when it comes to monitoring credit, particularly where the individual ticket sizes are small, but we insist that the customer has a valid trade licence and that they have proper insurance in place, that documents are up to date and that Know Your Customer (KYC) is refreshed annually.

These practices are well established over many years – a level of consistency that has served, and continues to serve, our clients well.