UAE urges banks to lend more to small businesses

UAE urges banks to lend more to small businesses

The survey covered 139 banks in the MENA region in 16 countries, including six from the Gulf Arab states.

October 6, 2010 3:42 by Reuters

The United Arab Emirates’ finance ministry has urged banks to increase credit to small and medium enterprises (SMEs) after a survey showed low levels of lending to this sector.

The survey by the Union of Arab Banks and the World Bank showed that bank lending to SMEs accounted for only 2 percent of total lending in the Gulf Arab countries and 8 percent in the Middle East and North Africa (MENA) region.

“Though GCC banks regard the SMEs segment as potentially profitable, there has not been a concerted effort to encourage lending to them and diversify the financial infrastructure,” Khalid al-Bustani, an executive director at the finance ministry, said in a statement.

“It is especially important in the UAE where we have increased the size of our non-oil economy year on year,” he said.

Lack of transparency and weak financial infrastructure that includes poor credit information are some of the obstacles hindering bank lending to SMEs, the survey said.

The survey covered 139 banks in the MENA region in 16 countries, including six from the Gulf Arab states. The average minimum turnover defining SMEs in the Gulf states was $61,000.

(Reporting by Stanley Carvalho; editing by Firouz Sedarat)