Qatar has 8,000-11,000 small and medium enterprises (SMEs) but their contribution to non-oil gross domestic product (GDP) is lower by the regional and global benchmarks, according to an official with the Qatar Development Bank (QDB). Qatar’s SMEs contribute only 15%-17% of non-oil GDP compared to 50.3% in the UAE, 53% in the US and 64.5% in the UK, said Dimitros Criticos, head of credit review at the QDB.
There are only 500 SMEs per $1bn non-oil GDP in Qatar against 1,900 in the UAE as well as the US and 2,000 in the UK, Criticos said, adding approximately half of the SMEs in Qatar do not have an active banking relationship.
“Qatar’s SMEs contribute less to non-oil GDP…However, each SME on average is comparable in size to its regional benchmarks,” he said.
In order to improve the situation, Criticos said, the QDB has defined two guarantee products, one aimed at start-ups and the other at existing companies.
Under the ‘Al Dhameen’ scheme for start-ups, the QDB will extend up to QR15mn for a maximum of three years with interest rate capped at 7%. The partner bank fees have been capped at 2% for project finance (one-off) and 1% for working capital facilities.
For existing companies, the QDB will extend up to QR15mn for a minimum of three years with interest capped at 7%. The partner bank fees have been capped at 2% for project finance (one-off) and 1% for working capital facilities.
The objective of the ‘Al Dhameen’ program is to facilitate the availability of funding for SMEs with viable business ideas which, otherwise, would have no access to funding from commercial banks.
By guaranteeing up to 85% of the loan extended by a commercial bank, Al Dhameen allows start-ups and small companies – that have an economically viable model, but that lack the collateral or credit history required by commercial banks – to still have access to funding.
Highlighting the advantages with the schemes, Criticos said “The QDB guarantee is designed to be unconditional and can be claimed after 90 days of non-payment by customer”.
The partner bank can claim within 150 days of non payment of interest and/or principal, he said. The QDB would disburse the guarantee within 30 days of claim, provided personal guarantees are in place, liens perfected, insurance in place (only in the case collateral recovery affected by lack of insurance) and loan agreement complies with guarantee agreement/loan authorization from the QDB, he said.
The QDB will be first made whole from any source of repayment (except from liquidation of primary collateral where partner banks have first priority), he said, adding that in case the debt is restructured after the QDB disburses guarantee, the partner bank could apply for a new guarantee provided the previous claim is reimbursed.
“Partner banks will have senior claim on eligible collateral, while the QDB will have senior claim on all other hypothecated assets,” he said.
The eligible collaterals include real estate (non primary residences, buildings, lands, villas, warehouses), listed securities, cash and government bonds as well as bank guarantees/facility guarantees; while hypothecated assets comprise real estate (plant buildings, warehouses); inventory, stores and spares; machinery and equipment; receivables; vehicles and intellectual property and other intangibles.
“Recommended acceptance criteria are also defined to set portfolio quality, but deviations can be accepted,” Criticos said.