HSBC Holdings launched on Tuesday a Dh1 billion fund for small and medium enterprises, or SMEs, and forecast that loans to the sector in the UAE would grow by 20 per cent this year.
The fund, HSBC’s third such fund in the UAE, is open to new and existing customers with cross border trading requirements. The bank has earmarked 30 per cent of the loans to Emirati-owned businesses.
The fund focuses on SMEs with international trading requirements, the bank said in a statement.
About 76 per cent of mid-sized companies carry out cross border business, and over 90 per cent of UAE-based businesses are currently involved international trade, the bank said.
HSBC said about 67 per cent of its initial fund was awarded to customers that required international trade facilities, while 87 per cent of its second fund was allocated to internationally-oriented SMEs.
The bank said it was bullish on the SME sector despite slowing of the overall loan book. The bank’s exposure to the sector in the UAE ending December 2011 was over $600 million.
“We saw a double-digit loan growth in 2011 to SMEs and we have a similar target in 2012,” said Nicholas Levitt, head of commercial banking UAE, corporate and business.
“The level of loan growth is very limited at the moment, it won’t go into double-digit growth,” he said. According to him, the big five local banks in the UAE posted only a 0.7 per cent growth in loans in the first quarter of this year.
The first two tranche of the SME fund, each $100 million, were launched in 2010 and 2011.
Trade in the UAE is projected to grow at seven per cent over the next five years and 5.5 per cent between 2016 and 2021.
“UAE companies will need to grow their trade to increase international business in the range of 5.5 per cent over the next 10 years,” said Rana Al Emam, head of business banking at HSBC Middle East.
HSBC is the first bank in the country to have a dedicated SME team. It is also the first bank in the UAE to launch a dedicated SME Fund back in 2010, which was then followed by a second in 2011. Abdulfattah Sharaf, chief executive officer of HSBC Bank Middle East Limited — UAE, said HSBC remained deeply committed to the UAE and the businesses that support the country’s economy. “We continue to work extensively with free zones, relevant government authorities and key working groups to ensure that the segment flourishes and grows.”
He said trade continues to be a strong area of focus for HSBC both regionally and globally. A trade bank by origin, HSBC believes that it can continue to add value to this segment through leveraging this strength, its global footprint and extensive expertise.
Rana Al Emam, head of business banking, HSBC Bank Middle East – UAE, said international trade is critical to global economic recovery. “Previous HSBC commissioned research shows that 76 per cent of mid sized corporates already conduct cross border business, and over 90 per cent of UAE-based businesses are currently involved in international trade.”
Nishant Vora, director of Gulf Worldwide, said his company was a beneficiary of the first SME fund and this really helped it grow business and expand sales and distribution network into new international markets — such as India and Asia.
“This is where we needed the global scale and the expertise of HSBC on our side, and we could not have done this without them.”