Transcript Supporting SMEs in Kuwait

SUPPORTING SMES IN KUWAIT
Nizamuddin Arshad
DISCLAIMER:
VIEWS EXPRESSED HERE ARE STRICTLY PERSONAL
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OUTLINE
oWhy SMEs matter
oSMEs in Kuwait
oConstraints to SME Growth
oAddressing the Funding Constraint
Central bank regulations and the bank lending
oNational Fund for SME Development
 a holistic approach to facilitate the growth of SMEs
o Way forward
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WHY SMES MATTER
Creating job opportunities in the private sector
Promoting economic dynamism
Covering the otherwise 'missing middle’
Helping diversify the economy
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WHY SMES MATTER
SMEs in OECD
• 95% of
enterprises
• 70% of
employment
SMEs in Developing
Countries
• 99% of
enterprises
• 78% of
employment
• 37% of the GDP
SMEs in MENAP
• Between 80%95% of formal
sector enterprises
• 20-50% of
private sector
employment
• 30% of the GDP
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SMES CAN HELP ADDRESS YOUTH UNEMPLOYMENT
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SMES IN KUWAIT
94% of
enterprises
23% of total
work force
3% of GDP
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SMES IN KUWAIT
Share of self-employed
Share of employment by enterprise
(2002-2010)
100
6%
80
5%
60
4%
3%
40
2%
20
1%
0
2002 2003 2004 2006 2007 2008 2009 2010
0%
1985
Small Enterprises (1-10)
Mediuam Enterprises (11-20)
Large Enterprises (20+)
2005
Kuwaitis
2011
Non-Kuwaitis
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KUWAIT: CONSTRAINTS TO SMES
Excessive Regulation
Challenges in recruiting
and retaining skilled
Kuwaitis
Perception and Culture
Lack of access to
finance
Lack of access to latest
and relevant info
Small domestic market
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EASE OF DOING BUSINESS: NOT THAT EASY
Ease of Doing Business-2017
Rank
Distance to frontier
80
120
70
102
100
94
60
83
80
50
40
63
66
60
30
40
20
20
10
0
0
Bahrain
Oman
Qatar
Saudi Arabia
Kuwait
MENA
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EASE OF DOING BUSINESS: NOT THAT EASY
Ranking on Doing Business
starting a business
200
resolving insolvency
150
dealing with
construction permits
Distance to frontier score
starting a business
100
resolving insolvency
100
enforcingn contracts
50
getting electricity
enforcingn contracts
getting credit
protecting minority
investors
25
getting electricity
0
registaring property
paying taxes
dealing with
construction permits
50
0
trading across
borders
75
trading across
borders
registaring property
paying taxes
getting credit
protecting minority
investors
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CBK AND SME FINANCE
Lower Risk
Weight
SME risk weight:
75%
Non-rated
corporates’ risk
weight: 100%
Interest
Rate
Ceiling
Loans under 12
months; 2.5%
above discount
rate
Less
Stringent
Treatment
Less stringent
regulatory
treatment than
personal and
installment loans
Loans for more
than one-year;
4% above
discount rate
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LENDING TO SMES
SME loans as % of total loans
30%
25%
20%
15%
10%
5%
0%
Kuwait
Developed Countries
Developing Countries
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NATIONAL FUND FOR SME DEVELOPMENT
Eligible SMEs: employing
upto 50 Kuwaiti
Will finance upto 80% of
capital for feasible SMPs
by Kuwaiti nationals
Creating jobs for Kuwaitis
in the pvt sector
Established in 2013
Executive regulations issued
in Dec 2014
Capital of KD 2 billion
Increasing SME
participation in economy
With financing requirement
that do not exceed KD 0.5
million
Creating business friendly
environment for SEMs
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NATIONAL FUND: SERVICES
Financial &
Business Support
to Startups
Improving
business
environment for
SMEs
Facilitation of
market linkages
Allocation of
land and office
spaces for SMEs
SME Financing
to Existing SMEs
Professional
Management
and Technical
Training
Business
development
services
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• SME fund and MOCI: One-StopShop to reform the business
registration process
• Unified Application form
• 9 MOUs with Govt. entities to
facilitate business registration
• 3 year leave plan for clients who
are public sector employees
Market access
Supporting Business
NATIONAL FUND: ACHIEVEMENTS SO FAR
• Market entry mechanism for
SMEs with Central Tenders
Committees and MOF for
government projects
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• Entrepreneurship
Capacity building
and support
program
• 2 Groups
• 60 Graduates
Exploring entrepreneurship
• Staffing
• Launch of
Arabic/English
website
• Launch of media
accounts
• Q&A list
• Call center
• Allocation of sites
of Hubs
Kauufam Fast track
Institutional development
NATIONAL FUND: ACHIEVEMENTS SO FAR
• Exploring
entrepreneurship
• 5 Groups
• 137 Graduates
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• Start a new
business
• Create a
business plan
• Managing
financials
• Story telling
platform
• Mix N’
Mentor:
Kuwait
Edition
Financial Services
• SME Toolkit:
collaboration
with IFC
Dev. Entrepreneurial culture
Toolkit
NATIONAL FUND: ACHIEVEMENTS SO FAR
• 59 projects
approved
Agri,
3%
Light
manuf,
20%
Commer
cial ,
41%
Services
, 36%
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A FINAL THOUGHT
HOW TO MAKE THE HORSE DRINK?
Encouraging
banks to
lend
Holistically
facilitating
SMEs
through NF
What is next?
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THANK YOU