Commercial banks in Bahrain have been urged to support small businesses.

Liquid assets of banks in the kingdom should be utilised to support the growth of small and medium enterprises (SMEs), according to economists and businessmen.

The topic was the focus of discussions at the Bahrain Chamber of Commerce and Industry's Entrepreneurs Committee meeting held yesterday at the BCCI headquarters in Sanabis, said a report in the Gulf Daily News (GDN), our sister publication.

Speaking to the GDN, Economic Development Board (EDB) chief economist Dr Jarmo T Kotilaine said that the liquid assets in Bahrain's banking sector were underutilised.

"The reality in Bahrain is that there is a lot of liquidity in the country's banking sector, which is not really utilised fully," said Dr Kotilaine.

"At the same time, we have the SMEs sector which requires growth capital.

"I realise that it is not easy for commercial banks to do this, but we have to try to find ways to make this connection possible, as it is critical for the future of the private sector.

"This is perhaps the only way to create sustainable growth and a modern economy."

He said that a range of solutions suitable to the economy must be worked out to establish this link.

"As we are aware, no magic bullet can make this happen, nor there is any easy simple answer to this situation," he said.

"We probably need a range of solutions that are sort of specific to the economy.

"We need information on start-ups to understand them better as to what they do, their track records, etc.

"There is probably a need for focused funding mechanisms for SMEs that can diversify and pool risk and really know their client base."

He noted that the new Tamkeen strategy was an important step in the right direction, wherein they were engaging with companies directly to understand their needs and support them efficiently.

Committee head Mohammed Adel Fakhro said the meeting discussed ways to increase the financing of entrepreneurs and encourage banks to support this.

"We urged banks to invest directly in companies or give them loans that can be converted into equities, so that they can benefit from the upside," said Fakhro, adding that government regulations that support investing in entrepreneurs were needed.

"The aim is to create a culture where investing with entrepreneurs is the natural path.

"Most people in Bahrain, who set up businesses, stay on their own or with families, but if we want these companies to grow, we need to change the entrepreneurial culture to one where a company is set up with the objective of ultimately bringing in investors onboard and looking at competing at a regional level as a larger entity.

"Looking at the profits of banks, the possibility of banks to give up a certain percentage of loans to small businesses is feasible.

"As entrepreneurs if we put money in the bank, we get one per cent on the deposit, while we get charged 10 per cent interest.

"None of these banks pay taxes, so there is a big gap where the banks are making profits and it is all about giving back to the community.

"Instead of paying taxes, if they commit to investing certain amount of the capital to support small businesses that have sales lower than certain amount, it would be beneficial."

However, BCCI Entrepreneurs committee vice-chairman Hamed Fakhro pointed out that banks will be reluctant to invest with SMEs.

"Banks have shareholders who look for profits and hence will not be keen on investing in SMEs.

"We need to find ways to increase funding for entrepreneurs, for which we have to primarily create a culture of faith and belief.

"We must begin with supporting potential entrepreneurs and heavily promoting them to expand to neighbouring countries. Once we create one of two such success stories, it will be easy to increase funding."

He also pointed out the need for the Central Bank of Bahrain's (CBB) direct involvement in this issue.

"There has to be a direct involvement of the CBB which needs to take some risk and there should also be co-operation between government and private organisations.

"This should be backed by qualified people in positions, who would care only about success of businesses." - TradeArabia News Service