UAE looks for SME funds outside banks
Innovative solutions considered for financial inclusion in the country, Central Bank chief says
The UAE will work towards a mechanism to provide credit to small and medium enterprises ( SME) outside the banking system, Sultan Bin Nasser Al Suwaidi, Governor of the UAE Central Bank, said yesterday.
“We are looking at various options to provide credit to this key segment of the economy outside the banki ng system. SME fi nanci ng i s very i mportant in job creation and we need to pay special attention to this segment,” said Al Suwaidi at the Middle East Banking Forum organised by the UAE Banks Federation.
The central bank and the federal government are currently studying the experience of countries such as South Korea, Italy and Malaysia in SME financing outside the banking system.
The governor said the central bank is keen on developing priority sector lending to support economic and social development while improv- ing financial inclusion in the country.
“There are still unbanked and under banked population in various parts of the UAE. We are looking at innovative solutions such as electronic banking services to reach these segments where bank branches are not viable,” said Al Suwaidi.
Domestic debt market
The central bank governor said, as part of the financial sector development in the country, creation of domestic debt market is a national priority. “Large companies and government related entities need alternative source of long- term funding other than bank financing. Banks also require funding to meet their capital requirements under Basel III. In this context, there is an urgency to create a local bond market,” said Al Suwaidi. While there is no time frame set for the creation of a local debt market, Al Suwaidi said discussions are taking place at the highest levels and all stakeholders in the market are involved in these parleys.
Commenting on the upcoming maturity of Dubai’s $ 10 billion bond placed with the central bank, the governor said it is up the board of the bank to decide on any potential roll- over.
In the face of the increased focus on asset quality and need to improve transparency in the banking sector, the UAE banks are preparing themselves for more selfregulation and will work closely with the UAE Central Bank, Abdul Aziz Al Ghurair, Chairman of the UAE Banks Federation ( UBF), said yesterday.
“The UAE Central Bank recently issued the mortgage regulations. In a few months from now we will have the credit bureau in operation. These new regulatory efforts are aimed at making the banking sector more transparent and customer friendly. The UAE Banks Federation will work towards more self- regulation and work closely with the regulator,” Al Ghurair said in a speech at the first Middle East Banking Forum organised by the UBF.
Earlier this month, UBF, the representative body of 51 banks operating in the country, adopted a code of conduct for all its members. The code aims to raise the professional standards of banking practice and to promote greater trust in the UAE banking industry.
Addressing the forum, guest keynote speaker John Bruton, former Irish Prime Minister and Chairman of the International Financial Services Centre in Ireland, said Middle Eastern financial institutions are adapting to changes quickly that are shaping the banking industry in the post- crisis era.
“There is a very healthy banking sector here, with a strong deposit base and a budget surplus, which is the envy of other regions of the world. Despite some over- centralisation in lending, banks are supporting the diversification and future growth of the UAE’s economy,” said Bruton.
Faster turnaround
Reviewing the performance of the banking sector, delegates at the conference said the UAE banks have made a faster turnaround in terms of capitalisa- tion and asset quality in the post- crisis years. “The banks here received strong sovereign support, which helped them to remain highly liquid during the crisis years. While capital levels remained exceptionally high during the period, improving economic activity has helped the asset quality,” said Timucin Engin, Associate Director, Ratings Analytical Financial Institutions.
According to the The Banker’s “Top 1000 World Banks 2013” report, the UAE banking sector’s net assets have risen more than ten- fold from $ 49 billion ( Dh180 billion) in 1995 to $ 509 billion in mid- 2013. The UAE banking sector direct-