Regional initiative to help fund SMEs

A survey to help World Bank and Arab funds inject more money

The Union of Arab Banks (UAB) is conducting a survey among its members, including local banks, to set unified standards for financing micro-enterprises as well as Small and Medium Enterprises (SMEs). The goal of the survey is to help the World Bank provide more funds to these institutions.

The survey is part of a memorandum of understanding signed between the UAB and the World Bank.

“The main purpose of this project is to finance small enterprises, which will create new job opportunities and reduce unemployment,” said Wissam Fattouh, Secretary General of the UAB. “Most Arab banks are still not paying a lot of attention to financing micro-enterprises and SMEs,” he said. According to him, the total amount of Arab loans reached $1.6 trillion in 2012, of which lending to micro- enterprises and SMEs represented on average eight to ten percent only.

“Lebanon has high activity in financing micro-enterprises and SMEs, especially through Kafalat guarantees and Central Bank support, but banks are still conservative towards lending this sector since its risks are high and companies do not disclose clear data,” said Fattouh.

A letter signed on behalf of the UAB and the World Bank has been sent to banks. It includes an explanation of the project in addition to the questionnaire. “The project will study the current practices of banks in financing micro-enterprises and SMEs, including for instance the definition of a micro project or an SME project and the loan amount granted,” said Fattouh. The project aims at helping decision makers, like the World Bank and Arab funds looking for investment opportunities, to have a clearer idea about projects seeking finance