National Bank of Abu Dhabi is drumming up future lending business from small companies by helping hundreds of them get better at succeeding, its chief executive said.
NBAD, the UAE's biggest bank by assets, is conservative when it comes to funding so-called small and medium sized enterprises (SME), a risky segment of the corporate world, said Alex Thursby. But on the flip side such loans come with much higher rates of return at a time when banks have been facing compressed margins because of low interest rates.
That makes helping SMEs become more bankable through training more than an act of altruism, he said.
"We're still running a bank for shareholders as well as customers," Mr Thursby said in an exclusive interview. "There are sectors and SMEs just as there are big corporations that we choose not to bank. But what we are saying is that SMEs can be a good profitable business for our shareholders. It's good business for us. It's something that we want to do and it will become increasingly important in this part of the world."
__________
More from Alex Thursby
■ NBAD looks to emerging markets. Read here
■ UAE banks may face tougher times. Read here
__________
In the past six weeks, the bank has put more than 100 business owners through courses using help from institutions including Moody’s and Hawkamah to help SMEs get a better grip on managing finances and planning for the future.
It is aiming to train a total of 250 businessmen this year and 600 SME owners next year, Mr Thursby said. NBAD’s move comes at a time of increasing stress for SMEs, usually the first casualty of a slowing economy. According to a survey this week by Gulf Finance, the SME lending arm of the Dubai-based investment bank Shuaa Capital, small businesses are increasingly becoming pessimistic about the outlook for growth.
UAE government officials have been counting on small businesses to play a key role in the development of the economy. SMEs account for 86 per cent of the workforce in the private sector, according to the Ministry of Economy.
And 300,000 companies can be classified as part of the SME sector, according to ministry data.
The push to promote SMEs, however, has been handicapped by the slowing economy, after the steepest drop in the price of oil since 2008.
Banks have also been feeling the heat as demand for loans cools.
That has made them keener to squeeze more profits out of businesses that give them higher returns than big established corporations. As well as SMEs, that includes loans to individuals. They, like SMEs, command higher rates of interest than those to companies because default rates are much higher.
Mr Thursby believes that in the future, more people will try and strike it out on their own rather than work for big companies.
“It’s a global phenomenon that individuals want to work for themselves or small companies rather than work for big organisations,” he said.
“Our children are philosophically very different in many regards. They are bolder, they want to take more risk. They also want a different approach.”
mkassem@thenational.ae
Follow The National's Business section on Twitter
