Friday 18 April 2014
 
»
 
»
Story

Funding crunch ‘hurting Bahraini start-ups’

Manama, July 22, 2013

Bahrain's banking sector is averse to risk, which makes it difficult for entrepreneurs and start-ups to get funding, a leading entrepreneur said.

"Despite all their successes, banks in Bahrain are reluctant to give loans to entrepreneurs. Talent really is not given much value," MBA Fakhro chairman Mohammed Adel Fakhro told the Gulf Daily News (GDN), our sister publication, in an exclusive interview.

"Broadly speaking, the banking sector and traders need to change their mindset about the way business is done in the country."

"A key issue is that a bounced cheque is a criminal offence in Bahrain, which should not be the case.

"In most places across the world, if entrepreneurs default on a payment, they don't go to prison," said Fakhro, who's involved in different capacities in dozens of business ventures.

"Today, if I'm an entrepreneur, at one point or another I will probably take a loan from a bank and if I default on that loan, I can go to prison," he said.

Fakhro, a Stanford University graduate, has also introduced several business concepts to Bahrain.

"Most normal people wouldn't want to risk going to prison for their business. Whereas, if I'm in Silicon Valley, and if a company fails, I'm not personally liable and it's not a criminal offence.

"Even the Company Law in Bahrain needs a relook. For instance, if you are an authorised signatory for cheques issued by a company where you are just an employee, you can still be held liable.

"Mind you, in no way does it mean that I'm condoning things like fraud - people issuing dud cheques and failing to meet their obligations. But the onus has to be on the enterprise to run credit checks on the people they are dealing with.

Concurring with Fakhro, an expert said the country's financial crime laws are in need of modernisation.

"The UAE has decriminalised defaulting on a loan not just for Emiratis but for expatriates also and I think it is time for Bahrain to follow suit."

Bahrain Association of Banks chief executive Robert Ainey was of the opinion that banks in the country were not necessarily averse to risk and had been adopting prudent practices in response to the economic environment.

"These are essentially regulatory and legal issues and we have to operate within the law of the land."

According to him it makes good business sense to not spend money you don't have.

"Massive deregulation in the US and Europe have directly led to the financial crisis and the economies that were not too badly affected were the well-regulated ones," Ainey said.

"Banks, you must remember, have a fiduciary responsibility to their shareholders and depositors.

"For businesses, facilities like overdrafts are available, depending on the bank's assessment of their creditworthiness. However, I do feel that an economy has to evolve according to opportunities available," Ainey said.

Another banker said while banks in Bahrain were not shying away from lending to small and medium enterprises, a push from the authorities in the form of mandatory lending to certain sectors would help.

"There can be some sort of quota-based priority sector lending as is the case in countries like India," he said.

"Those sectors of the economy which may not get timely and adequate credit in the absence of this special dispensation would benefit," he added. – TradeArabia News Service




Tags: Bahrain | Funding | entrepreneurs | Start-ups |

More Finance & Capital Market Stories

calendarCalendar of Events

Ads

Buy high quality China wholesale Health & Beauty , Electronics, Sports & Outdoors , Computers, Video Games, Toys & Hobbies Cell Phones, Automobiles and other wholesale products directly from reliable Chinese wholesalers or Factories on DHgate.com