JEDDAH: ARAB NEWS
Published — Saturday 19 July 2014
Last update 19 July 2014 1:04 am
New report shows that capturing SME segment is critical for GCC banks to retain competitiveness and spur private sector growth.
Capturing the SME segment is now a critical strategy for large banks in the GCC and is no longer limited to smaller retail or specialized banks.
From Saudi Arabia through to Oman, increased governmental and policy focus on scaling established SMEs, entrepreneurship support and a restrained SME credit market is providing the opportunity for banks in the GCC to seize a “first-mover” advantage and innovate its products and services to tap into SME segments.
Global best practices in SME banking show that banks can derive over 60 percent of its revenues from supporting SMEs, specifically through the introduction of non-loan based products and services.
For GCC banks to penetrate this segment and create returns from SME clients, they should pursue an execution strategy that is consumer-centric, and focuses on enhancing client relationships and transaction-based products.
The report titled “Innovating SME Banking in the GCC” released by de Kerros & Company addresses how banks can seize the largest untapped market opportunity, strengthen their market share, and deploy new tools that optimize serving SMEs, while mitigating risk and operational costs.
“Micro-enterprises and startups can easily access finance and benefit from dedicated support services within the entrepreneurial ecosystem,” says Tatjana de Kerros, managing partner of de Kerros & Company and author of the report.
“However, existing SMEs who are more likely to scale and exponentially contribute to job creation and economic productivity are being neglected in the Gulf. Banks have a unique opportunity to capitalize on this segment by optimizing financial and non-financial product and service offerings that meet the operational and growth requirements of SMEs, while increasing their returns and supporting private sector growth,” he added.
With bank lending to SMEs standing at just under 2 percent in the GCC according to the IFC, the debate needs to shift away from the lack of credit supply, to how to meet SME demand. Such an approach will increase banking engagement, identify market gaps, and engage financial, private and government actors to better mobilize resources to increase the productivity of SMEs and position them as vital elements of economic growth.
The de Kerros & Company is described as the emerging leader in strategic consulting, specializing in techno-policy, innovation and economic development for GCC markets. It advances solutions and know-how that enable institutions, organizations and regions to catalyze knowledge-based-competitiveness.
Transforming ideas into tangible growth requires re-imagining, re-inventing and re-designing the way institutions and systems interact in an increasingly complex environment.
The mission of de Kerros & Company is to support its clients in achieving long-term success, pioneer-thinking and meaningful, long-term results by co-creating solutions for the most pressing challenges to economic sustainability and competitiveness.
Its solutions and applied expertise include economic and industrial development; entrepreneurship, new venture creation and spin-off’s; national innovation systems and infrastructure; institutional development and policy planning; program ideation and implementation; custom research and future planning, future studies and horizon scanning.