Selected by Emirati bankers and entrepreneurs
10 basic requirements for facilitating the financing of emerging national projects
The interest on lending varies according to several factors, including the difference in the purpose of the loan.
archival
picture
Bankers have identified 10 basic demands from Emirati banks and entrepreneurs in order to provide easy bank financing for new “emerging” Emirati small projects, with the aim of giving a boost to the small business sector and increasing the number of projects of Emirati entrepreneurs.
They explained to "Emirates Today" that the demands are that banks should reduce their profit margin from lending operations, in addition to reducing bank fees for borrowers, with the need to request less guarantees for loans.
They called on banks to prepare the necessary studies and train their employees, in addition to establishing departments to deal with small projects, and called on them to benefit from the experiences of other countries in this field.
They also called on entrepreneurs to contribute part of the project's capital, as well as prepare appropriate feasibility studies for the project, and support their abilities to prepare financial statements and submit them to banks, in addition to the need for the project to be acceptable and compatible with the requirements of society.
Earnings and fees
In detail, the bank, Awatif Al-Harmoudi, called on banks to reduce their profit margin from lending operations to certain categories of dealers, led by the pioneers of national workers. Warranties are exaggerated as sometimes happens.
Al-Harmoudi explained that the increase in the benefits of financing from banks is mainly due to the high risks of financing small and medium enterprises in general, especially new small enterprises that do not have a previous activity or record of working and borrowing with banks.
At the same time, Al-Harmoudi called on the citizen entrepreneurs to contribute part of the capital of the project to increase the bank's conviction of the economic feasibility of the project, in addition to the need for the project to be acceptable and compatible with the requirements of society and in great demand.
She pointed out that banks generally refuse to finance projects that may have ideas imported from abroad or alien to society.
important ideas
For his part, the banker, Amjad Nasr, said that bank financing of small projects for entrepreneurs is one of the problems, given that this hinders the transformation of some important ideas of entrepreneurs into projects on the ground, at a time when many banks refuse to finance such projects. .
He indicated that some banks refuse financing because they consider financing emerging projects to be of high risk, especially if good financial data for these projects are not available, and if the financing request was before the start of the project or two years before its establishment to ensure its continuity.
He added that many banks require tangible financial flows for projects as well as tangible guarantees, explaining that in this case, banks prefer that entrepreneurs be employees and have guarantees such as salary or real estate owned by them to be taken as guarantees for their projects.
problem
Nasr stated that the problem of banks is that they used to finance existing projects and not projects under establishment, which requires preparing the necessary studies, training employees, and establishing departments in banks to deal with this type of projects.
He pointed out the importance of banks trying to benefit from the experiences of other countries that have successful experiences in this field, such as China, Singapore and Canada, and apply them in line with the work environment and the existing legal and legislative organization in the country.
Nasr stressed the importance of involving the Central Bank, the UAE Banks Federation, and relevant government agencies, in developing appropriate and sophisticated mechanisms that banks can implement to support the financing of emerging projects for Emirati entrepreneurs, and allocating part of the funding allocations in their annual projects for this category, provided that this is done as soon as possible and in a coordinated manner.
financing tools
Nasr said, "It is unreasonable to continue relying on the same financing tools, such as consumer loans for individuals, financing large companies, and neglecting the entrepreneurs sector."
He explained that the biggest challenge for entrepreneurs today is related to technical issues related to financing, such as preparing appropriate feasibility studies for the project that show the existence of a business plan and the viability of the project for success, in addition to the ability to prepare, read, analyze and present financial statements to banks, which are generally requested by banks as preliminary conditions for financing, calling for studies Good feasibility and efficient preparation of in-depth financial statements.
Lending cost
In turn, the banker, Ahmed Youssef, said that the high interest in lending to small projects emerging for entrepreneurs increases the cost of lending to become very high, pointing out that the government is currently focusing on the entrepreneurs sector and is working to provide a variety of means to finance them.
Youssef added that banks have already begun to help entrepreneurs by determining the amount that the entrepreneur needs on a monthly basis, and let it be 10% of the value of the project, so it is facilitated to obtain a loan of this value only so that the entrepreneur does not pay interests for the whole amount, which constitutes a great burden on him and he will not Use it only after several months.
responsible
Youssef considered that some entrepreneurs bear the responsibility of the high cost of lending to banks for not providing good feasibility studies for projects, calling for the use of companies specialized in this field to verify the existence of a return on the project worth the risk, which raises the degree of the bank’s confidence in it, which is translated into reducing the interest owed. on financing.
He called on entrepreneurs to contribute part of the project's capital if they were able, so that the bank would become more convinced of its financing.
Youssef explained that the interest on lending varies according to several factors, including, for example, the difference in the purpose of the loan, and whether it aims to purchase equipment, for example, or pay salaries to employees or purchase an administrative headquarters for the project and so on.
The 10 demands
■ Banks reduce their profit margin from lending.
■ Reduce bank charges for borrowers.
■ Request less collateral for loans.
■ Banks prepare the necessary studies.
■ Establishing departments in banks to deal with small projects.
■ Benefit from the experiences of other countries.
■ Entrepreneurs contribute a portion of the project's capital.
■ Prepare an appropriate feasibility study for the project.
■ Supporting the capabilities of entrepreneurs to prepare financial statements.
■ The project should be acceptable and compatible with the requirements of the community.
innovative initiatives
The banker, Amjad Nasr, stressed the importance of benefiting from new and innovative financing initiatives at the level of some companies and businessmen, such as the so-called angel or private financing, explaining that it is the financing that focuses on pioneering and innovative ideas and not traditional ideas.
He added that these projects are adopted and some businessmen enter as partners with the owners of the idea with assistance in completing the technical aspects of converting it into an institutional project, which requires an effort from the financing bodies, namely banks alone or in cooperation with business incubators, to facilitate financing operations.
Nasr also stressed the importance of taking advantage of crowdfunding initiatives, which are concerned with putting forward ideas on collective platforms that individuals or institutions are convinced of and pump funding to the project owner.
And he indicated that this can only be done in cooperation and alliance with banks, where the role of the bank is not only a financing role, but rather as a mediator between individuals who liked the idea and wanted to finance it.
Follow our latest local and sports news and the latest political and economic developments via Google news