JEDDAH – 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, a new report released by de Kerros & Company titled “Innovating SME Banking in the GCC” said. 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, focuses on enhancing client relationships and transaction-based products. The report addressed how banks can seize the largest untapped market opportunity, strengthen their market share, and deploy new tools that optimize serving SMEs, whilst mitigating risk and operational costs. “Micro-enterprises and startups can easily access finance and benefit from dedicated support services within the entrepreneurial ecosystem,” said 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, whilst increasing their returns and supporting private sector growth.” 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. — SG
