Banks are providing inadequate loans to small and medium enterprises (SMEs) in the Middle East and North Africa (Mena) region, thereby hindering their growth, a study shows.

SMEs get no more than 8 per cent of total lending by banks in the region, according to a study conducted by the Union of Arab Banks in association with the World Bank.

Zed Ayesh, general manager of Flagship Consultancy, commented: “SMEs are not provided funds for many reasons, and therefore they lose great opportunities to boost their market share.” The study covered 139 banks in 16 countries including six from the GCC and 76 national banks and 34 foreign banks.  Twenty-nine of the banks were state-owned and 110 were private.

“These companies have enough management and marketing capabilities to enter foreign markets if only they were supported through appropriate loans from government and private banks,” Ayesh said.

SMEs neglected
The study also brought out that SMEs received only 2 per cent of total bank loans in the GCC region against 14 per cent handed out to non-SMEs.

“Arab economies should unify their administrative and economic criteria when dealing with SMEs but the truth is Arab countries lack the kind of unity seen in Europe or North America,” said Ayesh.

“Our SMEs are among companies that are playing a pivotal role in accelerating the pace of recovery from recession. The US, which is the world’s largest economy, built its economic system through 75 per cent contribution from SMEs.”

Ayesh said the recession had seriously hit large companies whereas SMEs had shown “stronger immunity,” indicating they could play a critical role in strengthening Arab economies.