Subsidized loans up to $677 million

Subsidized interest loans to productive sectors reached $677 million at the end of 2014, up by 28 percent, according to the Central Bank (BDL).

“The value of these loans is still low, but they are supporting banks to diversify their loans portfolios and productive sectors to develop their business, as well as contributing to the growth of the economy,” said Marwan Mikhael, Head of Research at Blominvest Bank. “Banks are enjoying high liquidity and are ready to provide more loans, once demand is there and risks are contained from any eventual default by clients,” he said.

The industry sector’s total subsidized loans reached $360 million in 2014, up by 32 percent. Industrial subsidized loans accounted for around 52 percent of the overall subsidized loans of the productive sector.

“Industries have been growing in the last four years, despite the economic slowdown,” said Ayman Fatayri, Head of Corporate Finance Department at BBAC. “Most factories were undertaking expansion plans of their existing facilities, opening new plants, or upgrading their machineries,” he said. According to Fatayri industries also have a competitive edge to grow their businesses, compared to other productive sectors since their activity is not only focused on the local but also the export market. “Demand for subsidized loans is driven by industries in the field of food, detergents, plastic, nylon, and textiles among others,” he said.

Subsidized loans to the tourism sector grew to $198 million in 2014, and increased by nine percent, representing a share of 34.5 percent of the overall subsidized loans to productive sectors. Agriculture captured the least share of subsidized loans with a total value of $118 million in 2014, up from $71 million in 2013.

Fatayri said that “banks’ subsidized loans to the tourism sector are still limited in the light of slow activity of investments, restricted currently to a few hotels or restaurants.” He said that “big farms have already benefited from subsidized loans or are renewing their loans. Although some new agricultures have started to enter the market, like exotic fruits, banks did not receive yet funding requests for big projects.”

Many private equity and venture capital funds have entered the market, providing financial support for Small and Medium Enterprises, but this may not affect companies’ demand for subsidized loans. “Banks do not fear competition with these funds as their investments are small compared to the size of banking loans and most banks are already investing in these funds,” said Mikhael. “The role of funds is essential for the development of capital markets since they encourage companies to show disclosure, transparency, and listing, which in return is beneficial for banks in continuing to lend to companies,’ he said.