KHALEEJ TIMES, Monday, Feb 11, 2019 | Jamadi Al Thani 6, 1440
UAE boosting financial inclusion for SMEs
Small and medium enterprises represent around 96 per cent of registered firms in
the Arab world, but they face severe financing issues and closing this financial
inclusion gap will help generate 15 million new jobs in the next six years, the
head of the International Monetary Fund said on Sunday.
"In the Arab region, SMEs represent
96 per cent of registered companies. They also employ half of the labour force.
Yet their access to finance is the lowest in the world as lending to SMEs in the
region is only 7 per cent of total bank lending," IMF managing director
Christine Lagarde said.
"We found that closing this financial
inclusion gap - with respect to the average of emerging and developing countries
- would yield multiple economic benefits. It could boost annual economic growth
by up to 1 per cent, potentially leading to about 15 million new jobs by 2025 in
the Arab region."
She acknowledged that the UAE, along
with Egypt and Jordan, have started to implement comprehensive strategies to
increase financial inclusion for SMEs.
"Based on our recent research, we
found that promoting SME financial inclusion requires a holistic approach. To
achieve meaningful, safe and sustainable SME access to finance, there is no
magic bullet. And partial approaches are unlikely to suffice," Lagarde told the
World Government Summit in Dubai.
The seventh edition of the summit
kicked off on Sunday with more than 4,000 participants from 40 countries.
Lagarde on Saturday called on Arab countries to rein in public debt, which has
more than doubled in the last five years.
She also noted that the oil exporters
in the Mena have not fully recovered from the dramatic oil price shock of 2014.
"Modest growth continues, but the outlook is highly uncertain - reflecting in
part the need for countries to shift rapidly toward renewable energy over the
new few decades, in line with the Paris Agreement."
Lagarde called for creating an uneven
playing for SMEs and state-owned enterprises as well as a sound banking sector
that facilitate market entry for small and medium firms.
She also sees a need for tapping
capital markets and supporting the development of SME capital market segments in
the Arab world. "Fintech is also a potential game-changer for SMEs. It can
increase competition among credit providers and expand credit information."