Saudi banks study ways to finance small- and medium-sized businesses

By Ribal Dayekh in Dubai
For Al-Shorfa.com
2010-02-27

[HASSAN AMMAR/AFP/Getty Images] Saudi traders work at a bank in Riyadh.

Dr. John Sfakianakis, chief economist at Banque Saudi Fransi, announced on Wednesday (February 24th) that local banks in Saudi Arabia are studying ways of financing small- and medium-sized businesses in order to increase their level of participation in the local economy.

He explained that the new mechanism aims at creating new and better financing methods than what is currently in place. He preferred not to disclose further details about the system that is still being prepared but indicated it would be among the best decisions made during the past five years.

Sfakianakis anticipated a significant increase in the profitability of Saudi banks this year. He said that the dynamics of the Saudi economy will witness growth and development compared with last year.

He added that loans by Saudi banks have started to increase and loans to the private sector also increased. Lending is better than last year, which is one of the main reasons for the increase in profits this year.

In Jordan, Minister of Labour Dr. Ibrahim Al-Omoush said Tuesday that the middle class in Jordan has disappeared as a result of the global economic crisis, which expanded the lower class. He said the government is working to help them reach the middle class.

Al-Omoush explained that the labour market in Jordan consists of 60% Jordanians. Among foreign workers, 71.5% are Egyptians, 6.2% are Sri Lankans and 1.9% are Indians. He said that the government is finding ways to replace foreign labour with Jordanians.

By the end of 2009 there were 335,707 expatriate workers who obtained permits to work in Jordan.

In Kuwait, statistics published on Tuesday by the European Union's (EU) statistics agency Eurostat, showed that exports by Kuwait to 27 EU countries in 2009 declined compared to 2008.

Kuwait's exports reached 2.84 billion euros while imports were at 3.71 billion euros, resulting in a trade surplus of around 863 million euros for the EU.

Kuwait primary export to the EU is crude oil while food and petrochemicals are secondary products. Manufactured goods, petrochemicals, food and drinks are the primary export products of the EU to Kuwait.

In Syria, Assistant Transport Minister Rajih Saree revealed on Tuesday that Systra, which had commissioned a study on the Damascus metro project, has announced results of the study which included the financing options which compare a completely government-funded option and one whereby management, importation and operation would be undertaken by the private sector.

The Syrian government is currently studying these options in order to approve the most suitable option in terms of the financing plans as well as the financing resources for the project. The first phase of the project will cost about 1.2 billion euros. Both the European Investment Bank and the French government said they would be able to finance the Green Line project, the first lines of Damascus Metro, at a cost of 400 million euros.

The UAE Central Bank allowed banks to give bonus shares to shareholders without putting a limit on the percentage of 2009 profits that these bonus shares should not exceed. The condition is that cash dividend payouts do not exceed 50% of net profits.

In a statement sent to banks, the Central Bank said it would allow the management boards to determine the percentage of bonus share payouts, provided that cash payouts remain within the limits set by the Central Bank, in order to maintain an appropriate level of liquidity.

Meanwhile, stocks across the region fell this week. The Saudi Index ended a nine-day winning streak on Tuesday.

The Dubai Index fell by 2.2% in its fourth consecutive loss. Emirates NBD registered a 5% fall. Union Properties dipped by 6.1% to reach its lowest point.

The Abu Dhabi Securities Market fell by .01%. The value of Abu Dhabi Commercial Bank stocks fell by 2.3 percent. Abaar Investments fell by 3.6 percent. The Qatar Exchange fell by 1.0% in the second session as Doha Bank fell by 9.4% after announcing a dividend of 5 riyals per share.

The Kuwait Stock Exchange closed .05% lower. Zain Telecom shares remained unchanged. The Oman Stock Market Index went against the trend, rising by .02%, buoyed by Bank Sohar's 2% increase. The Bahrain Stock Exchange fell by .05% amidst low trading activity.

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