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Banks and QBIC look to unlock the potential of SMEs and entrepreneurs

Article - August 16, 2017

Encouraging entrepreneurs and building a thriving SME sector is integral to the National Vision 2030 plan to develop a sustainable and diversified economy that is not overly dependent on oil revenues. Since 1998, Qatar Development Bank has granted QAR 4.85 billion ($1.33 billion) in loans and advances to Qatari SMEs, while the Qatar Business Incubation Center looks to nurture the emirate’s next QAR 100 million companies


Playing a major part in Qatar’s economic diversification drive is not only the encouragement of increased private and foreign investment in non-energy sectors such as financial services, health, education, sport and business-related tourism, but also heightening the role of the private sector through greater participation of small and medium-sized enterprises (SMEs) in order to create a future knowledge-based economy.
There has been undoubted progress on both these fronts recently, namely: The increased funding and remit for the Qatar Development Bank to assist the development of the private sector; the appointment last year of the Minister of Economy and Commerce, Sheikh Ahmed bin Jassim bin Mohamed Al-Thani, as the new Chairman of the Qatar Stock Exchange; the opening of the Qatar Business Incubation Centre – the largest in the MENA region; and the launch of three special economic zones.

What’s more, on top of the significant decision to augment the maximum level of foreign investment in listed companies from 25% to 49% in 2014, earlier this year the Ministry of Economy took another important step towards increasing private sector participation in the Qatari economy by submitting a draft law covering the use of public-private partnerships (PPP).

The law, which the government intends to implement by the end of the year, plans to offer 30% of its tenders to SMEs in an attempt to further cultivate the culture of innovation deemed essential for sustainable growth. Also fundamental to helping further nurture this environment where entrepreneurialism can flourish and form the backbone of a more diversified economy are the country’s financial institutions, which are offering tailor-made services to the sector.

None more so is this the case than with the aforementioned Qatar Development Bank (QDB). Established in 1997 as a 100% government-owned developmental organization, QDB’s traditional aim has been to develop investments within local industries, thereby accelerating growth and economic diversification in Qatar through support for the local private sector.

“QDB aligned its strategy to correspond with the Qatar National Vision for the year 2030, to promote and facilitate development and growth of small and medium enterprises in core economic realms, resulting in long-term socioeconomic benefits to the people of Qatar,” explains CEO, Abdulaziz Bin Nasser Al-Khalifa.

Since 1998, QDB has granted QAR 4.85 billion ($1.33 billion) in loans and advances to Qatari SMEs. However, in order to do as such, several impediments have needed to be addressed, including major hurdles that inhibit the establishment, growth and ultimately the sustainability and success of Qatari businesses.

“With regard to our role, QDB adopted several initiatives capturing key elements of the SME life cycle. I am glad to note that in doing so we have pioneered several new financing products. Those products include conditionally repayable loans to local SMEs to become listed at Qatar Exchange Venture Market as well as holistic support for local growth businesses to become franchisors and grow their businesses internationally,” explains Mr. Al-Khalifa.

The Qatar Exchange Venture Market (QEVM) Program is a joint initiative between QDB and the Qatar Stock Exchange (QSE), with the key objective being to assist potential Qatari SMEs to list their businesses on the QEVM. As part of the Program, QDB supports Qatari shareholding companies who meet QEVM’s minimum listing and regulatory requirements.

“The program’s innovative structure reflects the challenging transformation that local SMEs have to go through in order to be listed at QEVM. As such, we have structured it through a conditionally repayable loan, which covers the fees of a Listing Advisor and is to be repaid only in case of successful listing of the SME and, in case of failure, it will be written off,” says the QDB CEO.

Aside from QEVM, the QDB has developed a host of other initiatives, the most recent of which is a memorandum of understanding signed by the Public Works Authority (Ashghal) in May, which aims to establish a framework to support participation of Qatari SMEs in national infrastructure projects. While that scheme is still getting off the ground, two of bank’s most long-established and successful projects have been Al Dhameen and Tasdeer.

“Thanks to our support, Qatari SMEs have signed exporting contacts worth over QAR 285 million, and last year we supported participation of 103 Qatari SMEs in eight international exhibitions”

Abdulaziz Bin Nasser Al-Khalifa, CEO, Qatar Development Bank

“Needless to say that QDB alone will never be able to carry a responsibility of financing local entrepreneurs and SMEs, therefore, one of the most important initiatives that we launched is Al-Dhameen Partial Loan Guarantee Program, which aims to overcome financing barriers faced by economically viable Qatari SMEs.” explains Mr. Al-Khalifa. “The program is designed as a partnership with Qatari banks to improve SME access to financing by covering a significant part of the credit risk. I am glad to note that Al Dhameen has been successful both in performance and in changing the culture of SME lending in Qatar, unlocking capital for small businesses. In terms of performance, the program has supported 255 SME projects through providing guarantees for 428 long-term and short-term loans worth QAR 1.138 billion ($312 million).”

The Tasdeer Program’s role, on the other hand, is to provide non-financial support for Qatari SMEs through developing their export capabilities and unlocking access of their products to regional and international markets.

“During 2015 alone, Tasdeer provided over 140 Qatari SMEs with various exporting opportunities while eight Qatari SMEs have become exporters,” says Mr. Al-Khalifa.  “Thanks to our support, Qatari SMEs have signed exporting contacts worth over QAR 285 million ($78 million), and last year we supported participation of 103 Qatari SMEs in eight international exhibitions.”

Nurturing the entrepreneurial spirit
Despite the resounding success of QDB’s Al Dhameen and Tasdeer projects, arguably the organization’s biggest overall development since its formation has been the establishment of the Qatar Business Incubation Center (QBIC). Founded in 2014 by QDB along with the Social Development Center – the country’s other leading entrepreneurship institute – QBIC has quickly become the largest mixed business incubator in the Middle East.

“Our organization fits within the entrepreneurship, startup development and incubation aspect of the SME vision that QDB is executing, as well as the Social Development Center,” says CEO of QBIC, Aysha Al Mudahka. “At QBIC, we welcome startups with potential to grow, and equip them with the tools and facilities they need to reach new levels and scale up. Our mission is to create the next QAR 100 million companies in Qatar, and to make sure that they survive the initial stages of joining the private sector and eventually grow into an SME.

QBIC’s programs allow entrepreneurs to partake without having a business plan, or specific degrees required to start a business. The experts at the incubation center help develop an idea and quickly transform it into a tangible product or service while being as cost-efficient as possible. The product is then tested in the market to find out how it does with target customers.

One of the latest steps forward at QBIC has been to branch out into sector-specific incubators, recently partnering up with the Qatar Tourism Authority (QTA) to set up QBIC Tourism. QBIC Tourism’s aim is to enable entrepreneurs to develop products and services to enhance the Qatar tourism experience, providing them with unique business development tools and access to insight and guidance from QTA decision-makers.

“Their offices are already full of people working on exciting tourism-related projects,” says Ms. Al Mudahka. “We have incubated ten companies so far, and have received hundreds of applications for aspiring entrepreneurs.”

Similarly, QBIC has also partnered with telecommunications group Ooredoo Qatar, establishing another specialized incubator called Digital and Beyond, which focuses on startups with digital solutions in a variety of sectors including: healthcare, sports, public services or finance. “The great thing about this project,” says Ms. Al Mudahka, “is that it exposes our entrepreneurs to the key influencers in the private sector, and grants them access to advisors and mentors in the technology and innovation sector. In line with Qatar’s National Vision 2030, we want to build strong ties with the private sector and increase our entrepreneurs’ input and role within it.”

“We understand the fundamental role that SMEs play in the economy by providing the engine for private sector growth and diversity in line with the Qatar National Vision 2030”

Joseph Abraham, CEO, Commercial Bank of Qatar

Aside from government-funded institutions such as QDB and QBIC, private financial institutions are also doing more than their bit to see that Qatar’s National Vision of creating a more diversified, knowledge-based economy by the year 2030 is realistically achievable.

For example, Commercial Bank of Qatar’s (CBQ) track record of supporting Qatari businesses spans back over 40 years. “This means we understand the fundamental role that SMEs play in the economy by providing the engine for private sector growth and diversity in line with the Qatar National Vision 2030,” says Joseph Abraham, the bank’s CEO.  “This sector has been asleep for some time, and now it is time for it to wake up, which cannot be done without the support of the financial institutions.”

Like with a growing number of Qatari banks, SME banking is now a core part of CBQ’s business, with many of the country’s banks also part of QDB’s Al Dhameen Partial Loan Guarantee Program and having dedicated departments providing specialized services to entrepreneurs.

“In most cases SMEs are new entrants into the market and they require a management style and processes that are more informal than for large corporations,” says Mr. Abraham. “We have assigned special relationship managers for each one of these businesses to make sure that everything is in order, thus minimizing the risk of default.

“There are some brilliant young, well-educated Qataris who are willing to take the challenge and risks to develop their own business. You can see the future in their eyes, which gives us much comfort because we know that these people have enormous potential.”

Another private institution doing its part is Doha Bank, which collaborates with QDB on the Al Dhameen program. According to CEO Dr. R. Seetharaman, Doha Bank was “the first bank to brand the SME as a prospective solution for a sustainable economic backbone of the Qatar economy.”

“We are already geared with a wide range of facilities being offered to SMEs, such as medium to long-term loans, short-term working capital financing and overseas trade finance,” he adds. “The Al Dhameen Program has been a very welcomed change. I believe the role of SMEs will be more vital for contributing to the Qatar economy on account of the public-private partnership development.”