Bank lending to small and medium sized enterprises (SMEs) in the GCC accounts for just two percent of the total loans, research by the World Bank has revealed.
UAE banks lent most to SMEs in the Gulf region but even there the percentage was just four percent of total loans.
In Qatar, SME lending made up just 0.5 percent of total loans, the World Bank figures showed.
However, analysts see SMEs as an increasing priority for policymakers in the Middle East and North Africa (MENA) region, which on average lent eight percent of its total loans to smaller businesses.
They see SMEs as key to solving the challenge of improving competitiveness, raising incomes, and generating employment.
Data from the World Bank suggests that access to finance for SMEs is more constrained in MENA than in other emerging regions, with only one in five having a loan or line of credit.
Roberto Rocha, the World Bank’s senior advisor in MENA, said: “Banks regard the SME segment as potentially profitable, and most banks are already engaged in SME lending to some degree. However SME lending accounts for only eight percent of total lending in the MENA region.
“More positively, bank targets for SME lending are significantly higher than current lending, indicating a significant potential supply side response if constraints can be eased.”
He said principal constraints for SME lending in the MENA region included a lack of SME transparency, poor credit information from credit registries and bureaus, and weak creditor rights.