Diamonds In The Rough

Transcription

1. IFN COUNTRY CORRESPONDENT Diamonds in the rough LEASING By Youssef Aboul-Naja In any given country , SMEs play a major role in its economy. They generally constitute the larger part of a country’s private sector. This is especially the case in developing countries. According to the World Bank: “Formal SMEs contribute up to 45% of total employment and up to 33% of national income (GDP) in emerging economies. These numbers are significantly higher when informal SMEs are included.” The conundrum that banks face is which of these SMEs are ‘bankable’? In other words, given that a larger percentage of these SMEs haven’t had any sort of ‘formal credit’ extended to them, which companies should banks back, without the risk of violating the myriad of regulations that they must adhere to? Does a ‘springboard’ system exist such as to take these SMEs from a ‘non-bankable’ to a ‘bankable’ state, essentially uncovering diamonds in the rough? Many reasons exist as to why a lot of these SMEs have difficulty obtaining formal credit and they include, but are not limited to the following: • Maintaining proper financial records • Required amounts are too small for the appetite of banks • A short track record, and • A low turnover. The list goes on. But this is a catch-22 situation. These SMEs cannot grow further without formal credit, and banks are not willing to lend to them unless they grow first — a chicken and an egg situation (which one comes first?). What IFN Sector Correspondents ends up happening is a lot of these SMEs depend on personal financing, angel investors, and more often than not, informal credit that charge exuberant rates. This subsequently, at best, caps the growth of SMEs, which in the bigger picture of things, caps the growth of a country’s economy. The World Bank indicates that 50% of formal SMEs do not have access to formal credit and the financing gap is even larger when micro and informal enterprises are taken into account. ACCOUNTING: Mezbah Uddin Ahmed, member of the Association of Chartered Certified Accountants and associate researcher at International Shariah Research Academy for Islamic Finance (ISRA). CROSS-BORDER FINANCING Fara Mohammad, director of Islamic finance, Foot Anstey CAPITAL MARKETS: Suhail Ahmad, CEO, Hikmah Capital Corp DERIVATIVES: Suhaimi Zainul - Abidin, treasurer for Gulf-Asia Shariah Compliant Investment Association and advisor to 5Pillars GLOBAL ECONOMIC OUTLOOK: Tariq Alrifai, expert, Islamic investment products and market trends LAW (EUROPE): Ayhan Baltaci, attorney at law, Bereket & Baltaci Law Firm LAW (MIDDLE EAST): Bishr Shiblaq, head of Dubai office, Arendt & Medernach This is where non-banking-financialinstitutions (NBFIs), such as the likes of leasing, play a pivotal role in economies. Given their appetite of higher risk, as compared to banks, coupled with a less stringent regulatory environment, these NBFIs are more tuned to extending financing to SMEs. With time, as these SMEs tap into formal NBFI financing sources, they slowly grow to adhere to the criteria of banks, graduating from non-bankable to a bankable state. LEASING Youssef Aboul-Naja, senior associate, ICD Accordingly, leasing companies should never confuse their market space with that of banks; leasing, by its very nature, is a complementing tool to banks, not a competing one. It is no surprise that a lot of banks globally hold stakes in leasing companies, in an effort to expand their market reach, without cannibalizing their existing stake. Leasing has existed for well over 4,000 years for a very good reason — it is the ‘diamond pick’ in the unearthing process. REAL ESTATE Philip Churchill, founder partner, 90 North Real Estate Partners Any public opinion or media appearance is the author’s independent personal opinion and should not be construed to represent any institution with whom the author is affiliated. Youssef Aboul-Naja is the senior associate at the Islamic Corporation for the Development of the Private Sector. He can be contacted at yaboulnaja@gmail.com. MERGERS & ACQUISITIONS: Tushar Garg, associate, bulge bracket investment bank MICROFINANCE (ASIA): Dr Mahmood Ahmed, executive vice-president and director training, Islami Bank Training and Research Academy MICROFINANCE (AFRICA): Mansour Ndiaye, director of microfinance, Assistance and Consulting for Development PRIVATE EQUITY & VENTURE CAPITAL: Arshad Ahmed, partner, Elixir Capital PROJECT & INFRASTRUCTURE FINANCE Anthony Coleby, head of corporate commercial department, Said Al Shahry Law Office (SASLO) REGULATORY ISSUES (ASIA) Intan Syah Ichsan , chief operating officer, Samuel Aset Manajemen REGULATORY ISSUES (MIDDLE EAST): Mohammad Abdullah Malik Dewaya, head of Shariah compliance and audit, Maisarah Islamic Banking Services RETAIL BANKING: Chowdhury Shahed Akbar, officer, Southeast Bank, Bangladesh. RISK MANAGEMENT Ken Baldwin, lecturer in finance, Coventry University SECURITIES & SECURITIZATION: Nidhi Bothra, executive vice-president, Vinod Kothari Consultants STOCK BROKING & TRADING: Athif Shukri, research analyst, Adl Capital STRUCTURED FINANCE: John Dewar, partner and head of Islamic finance, Milbank, Tweed, Hadley & McCloy SUKUK Anthony Coleby, head of corporate commercial department, Said Al Shahry Law Office (SASLO) SYNDICATED FINANCE Damir Galiev, portfolio manager, AK BARS Bank TAKAFUL & RE-TAKAFUL: Dr Sutan Emir Hidayat, assistant professor and academic advisor for Islamic finance, University College of Bahrain TAKAFUL & RE-TAKAFUL (AFRICA): Uwaiz Jassat, acting head of Islamic banking, Absa Islamic Banking Diagram 1: NBFIs like leasing play a pivotal role in economies TAKAFUL & RE-TAKAFUL (EUROPE): Ezzedine Ghlamallah, director, Solutions Insurance and Islamic Finance in France (SAAFI) TRADE FINANCE Anthony Coleby, head of corporate commercial department, Said Al Shahry Law Office (SASLO) Bankable NBFIs (Leasing) Non-bankable TREASURY PRODUCTS: Nafith Al Hersh Nazzal, Islamic banking specialist, certified financial and investment advisor IFN Correspondents are experts in their respective fields and are selected by Islamic Finance news to contribute designated short sector reports. For more information about becoming an IFN Correspondent, please contact sasikala.thiagaraja@redmoneygroup.com Source: Author’s own © 20 21st September 2016