Two bankers attributed it to the high risk and absence of collateral

Banks raise interest on financing small and medium-sized companies to 15% ... and others stop financing

Merchants have confirmed their need to support banks now more than ever.

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Owners of small and medium companies reported that they find it difficult to obtain financing due to the increase in interest rates, which in some banks have reached 15%, at a time when the return on trade, investment and business in general has declined due to the repercussions of the Corona pandemic.

They added to "Emirates Today" that some banks closed the sections devoted to financing small and medium-sized companies, and contented themselves with the presence of one or two employees in the main branches, which made the completion of transactions significantly delayed and the rate of approval of applications is "very few", and not in line with the directives of the Central Bank and the government To facilitate access to finance.

For their part, two banking experts said that financing this sector carries a high risk and often does not have guarantees, so banks are strict in lending, explaining that some banks have closed sections of financing small and medium enterprises, but this was due to the presence of default cases among their clients, pointing out that The spread of "Corona" and the consequent impact of the business sector, deepened this policy of these banks.

7 years

In detail, (K.A.A.), the owner of a company, said that the bank he had been dealing with for nearly seven years had stipulated that in order to be financed, he should obtain 15% interest, refusing any negotiation to reduce it, despite the fact that all cash flows for his company are deposited in an account with this bank And there are no delinquencies or bounced checks on him, pointing out that private business or trade does not achieve a return of 20% in light of the repercussions of Corona and the failure of the market to fully recover, so how can the return be paid to the bank?

For his part, (A.A.), the owner of a small company, said that the bank told him that the interest on financing is 13%, and that he must provide additional guarantees in addition to the cash flows that appear in the budget, pointing out that the field in which he works is required in the market and there are no risks Remember in financing it, however the bank is strict in granting financing, wondering where are the directives of the Central Bank and government agencies calling for support of this vital sector.

interest rates

In the same context, ES, the owner of a company, said that he tried to take financing from more than one bank, and he was surprised that interest rates were not less than 11% and up to 15%, which is a great challenge for owners of small and medium enterprises in the current market conditions, Adding that merchants need to support banks now more than ever, especially national companies whose reputations cannot be sacrificed by their owners.

He pointed out that some banks have permanently closed the financing of small and medium enterprises, and are satisfied with one or two employees in the main branches, in addition to that the responses to the customer are delayed for a long time sometimes, up to two or three months, explaining that the deal or the opportunity for expansion or trade cannot be Waiting for all this time, pointing out that most of the responses are by refusing financing, on the pretext that the bank’s policy does not allow this.

Degree of risk

On the other hand, the banking expert, Rashid Abdullah, said that “the degree of risk in financing the small and medium-sized enterprises sector is very high, so the banks themselves believe in raising the interest, so that it guarantees the repayment of the bulk of the financing in the first years of the loan’s life. In addition, the central bank requires The presence of deposits against lending, in the case of small and medium enterprises, reaches 100%. This makes the banks strict in granting financing and studying each case separately before approval.

He added: “The market itself is not favorable after (Corona), and the policy of banks is to focus on lending to sectors that have not been affected and have growth opportunities. Therefore, it is natural for customers to feel that the approvals take time, or that the interest rate is high, or the amounts of financing themselves are lower.”

For his part, the banking expert, Muhannad Awni, said that “the financing of small and medium enterprises in some banks was closed nearly two years ago when some clients defaulted and others fled, and from that time there was a large hedge of banks towards lending to this sector, and the focus became on companies. "Large and governmental organizations, due to their low risk.

He added that the repercussions of Corona have deepened the conservative banks ’policy, especially in light of the lack of adequate guarantees in financing this sector.

• Expert: The repercussions of "Corona" deepened the conservative banks' policy.

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