JEDDAH: Speakers at the fourth Saudi Trade Finance Summit called for providing new governments guarantees to boost the funds offered to the small and medium size enterprises. The speakers noted that there is a move toward supporting such investments to go in line with the Saudi Transformation Plan which opts to make these SMEs account for 35% of the GDP. SMEs can help diversify the economy, contribute the GDP and provide jobs to locals, the speakers agreed.
Keynote speaker Iyad Tardi, chief financial officer at Bahra Cables, said there are a number of challenges that face SMEs in the kingdom, on top of which is financing, bureaucracy, accounting and human resources challenges as well as lack of opportunities for internationalization among other local labor challenges.
He noted that 27 percent of the SMEs operate in the commercial sector while 12 are in industrial, 8in social services and 6 in commercial and hotel sectors. He said there is a need to increase the access to the SMEs data so commercial banks can extend more credit to SMEs. He also stressed that there is a need to provide more Shariah-compliant financing solutions through developing Islamic Trade Finance tools. In addition, training and resource development should be offered to SMEs. Asked about the drop of salaries and its affect on SMEs, he said “people may move from the public sector because of the drop in salaries and therefore that would create a better potential for SMES.”
Answering Saudi Gazette question about the guarantees that financial institutions opt for in order to provide funds to SMEs, he said “there is no clear system in Saudi Arabia like in other countries. There is no particular government department that follows the mortgage. If the person failed to pay, then the loan provider [the bank] need not to spend years at courts to get its rights. This is a major challenge to funding.”
Speaking about the SMEs, Mohammad Al-Ruwaiti, head of the SMEs at SIMA – the Saudi Credit Bureau, told Saudi Gazette that majority of SMEs are located in Riyadh, Jeddah and The Eastern Province with little participation in the northern region and other parts of the kingdom. He explained that women participation in the SMEs is minor compared to men. “In general, majority of projects used to concentrate on contracting and we are advising new SMEs not to move toward that direction. The industrial and the retail sectors are now offering more potential for investors.”
Speaking on the sidelines of the summit, Amjum Mirza, head of trade finance sales and solutions at Banque Saudi Fransi, said there is a need to increase awareness and communication between SMEs, the banks and the government. This, he said, is crucial to make more government guarantees to SMEs projects particularly projects that contribute to the development of the country. He noted that SMEs are the backbone of trade, and explained that “trade finance is the heart and soul of any business. Eighty percent of the world business is done on trade. Trade finance is going to grow here as well, as trade exports are targeted at $1 trillion in 2030. The dependency on oil needs to end.”
