Abu Dhabi FAB sees double-digit growth in SME business this year

The UAE's biggest lender by assets is targeting more than a 20% share of the overall SME market by 2020

FAB Headquarters -- The lender says it has seen an improvement in asset quality of its SME portfolio. Photo Courtesy: Seven Media

First Abu Dhabi Bank, the biggest lender in the UAE by assets, expects its small- and medium-sized enterprises business to continue delivering double-digit growth in 2019 as the lender eyes increasing its share of the SME market to beyond 20 per cent, a senior FAB executive said.

The bank, which currently controls about 15 per cent of total SME market share in the UAE, is looking to achieve the milestone by 2020, said Vikas Thapar, head of the business banking group at FAB.

The combined book of FAB’s business banking group – primarily its SME business including assets and liabilities – grew a little more than 15 per cent in 2018 to Dh20 billion and Mr Thapar expects it to grow by double digits this year as well.

"We continuing to grow ... there's a lot of focus on overall SME business in FAB," he told The National on the sidelines of the SME World Summit in Dubai.

“Every SME generally banks with three or four banks on average and as the leading bank [in the UAE] we want to have the biggest share of the wallet from all the customers we have.”

Increasing the contribution of SMEs to the economy is a key objective of the UAE’s national growth strategy. SMEs account for 95 per cent of the registered businesses in the UAE and employ slightly over half of the entire labour force in the country. These businesses contribute 47 per cent of the gross domestic product of the UAE, the region’s second-biggest economy, which it aims to increase to 70 per cent by 2021, according to a FAB presentation at the conference.

With the three-year oil slump that began in 2014, banks became more averse to lending to small businesses, curtailing their ability survive the downturn. In turn, defaults on loans increased (or skips as they were called at the time) as some of the businesses went under.

However, the number of skips and bad loans in the SME sector have come down “drastically” from the peak, Mr Thapar noted.

“From our perspective we see a very radical change in the quality of our portfolio as the number of skips has fallen,” he said. “Non-performing loans are one-fourth of what they used to be.”

The government at both the federal and emirate level is now encouraging lenders to increase financing for SMEs. FAB is working with different government agencies in both Dubai and Abu Dhabi, including a major project with Abu Dhabi Executive Council, on development and growth of the SME sector, he said, declining to give the details of Abu Dhabi project.