Financial Markets and Small and Medium Enterprises (SME)

Posted on by raju
Press Release
29 Aug

The Global Financial Markets continue to witness turmoil and also Small and Medium Enterprises ( SME ) is witnessing significant developments .In this regard we would like to hear from you.

  1. What are the recent trends in Global Financial Markets?
    • U.S. stocks tumbled, sending the Standard & Poor’s 500 Index to its biggest four-week loss since March 2009.
    • Markets sense a European fiscal denouement on the horizon and they understand that contagion can hit the U.S. very quickly. Concerns that it won’t take much for interbank lending to freeze. Speculation that European banks don’t have enough capital.
    • American regulators are intensifying scrutiny of the U.S. arms of Europe’s largest banks.

    BOND YIELDS LOW

    • U.S Benchmark 10-year note yields fell below 2 percent for the first time, tumbling on Aug. 18 to a record low 1.9735 percent.
    • German Ten-year bund yields fell 23 basis points this week to 2.11 percent as concern about global growth and European officials’ ability to solve the region’s debt crisis drove investors to seek the safest assets this week.
    • Gold rose to a record above $1,880 an ounce rallying for the seventh straight week, as concern that the global economy is slowing drove equities lower. It ended at $1852. Silver ended at $42.43.

    HEDGE FUNDS BEARISH

    • Hedge Funds Most Bearish Since July 2009 After Global Equities Retreat 15%.
    • Morgan Stanley said the U.S. and Europe are “dangerously close to recession.
  2. What are the recent trends in Gulf Financial Markets?
    • Gulf stocks were volatile this week reflecting investors’ fears over world economic recovery and the continuing fallout of the downgrading of the US sovereign debt risk by Standard and Poor’s (S&P).
    • Fear that the days of global economic recovery and rising oil prices may fast be fading has sent shivers through Gulf stock market.
    • Saudi shares marginally rebounded last week, led by the petrochemical and banking sectors.It lost by around around $11 billion in the first half of August to $326 billion. YTD down by 8%.
    • The Kuwaiti bourse ended the week’s trading with a slip of 5.8 points in the price index.(US credit rating downgrade, European debt crisis and a slump in local corporate results). YTD down by 16%.
    • Market capitalisation was down 0.20% or QR87mn to QR435.06bn. Except Domestic institutions all others were bearish during the week. YTD down by 6%.
    • All GCC market down this month.
  3. What are the Global trends in SME business?
    INDIA
    • Small and medium enterprises (SMEs) are expected to contribute 22 per cent to India’s Gross Domestic Product (GDP) by 2012.60% of them are aggressively upgrading themselves technologically.
    • SME sector contribution India ‘s exports increase to over 44 per cent by 2012 with the help of modernised technology.

    CHINA

    • China’s financial institutions increased lending to small businesses in the first half of 2011 by 18.2% YOY to $3.1 trillion.
    • In June 2011, China’s banking regulator enacted measures to boost lending to small businesses, many of which are struggling with weaker sales and costly loans.

    US

    • SMEs are an important source of innovation processes, products, and services and can be more efficient at producing innovation than large firms.
    • Small business has led the U.S. out of every recession after the Great Depression until now.
    • As a weaker dollar and lower costs can make small businesses more competitive.  Small businesses, when run efficiently, can become big export engines KEY is small business needs enough incentives to support.

    UK

    • SMEs make up the backbone of British industry and will need to take advantage of the abundance of highly skilled graduates leaving university looking for work.

    Australia

    • There are over 1.2 million SMEs representing over 96% of all business and 33% of GDP. It makes them Australia’s largest employer.
    • Of the 1.2 million SMEs in Australia, more than two thirds employ between one and four people.

    With unemployment being a issue prevailing in developed economies promoting SMEs will be one of the key areas for government to consider to remove unemployment issues.

  4. What are the trends in GCC SME business?
    • Potential sectors for growth in GCC SMEs- Food and beverages sector and Transport and Storage.
    • In UAE SMEs account for 95 percent of firms. SMEs in the trading sector typically have up to 75 employees and a maximum turnover of 250 million dirham’s ($68 million).
    • Traditionally, local banks have been the main source of small business funding in UAE with loans awarded on a name lending basis to limit risk exposures.
    • However recently small businesses in the United Arab Emirates face ongoing difficulties to access loans as banks prefer lending by name and remain hesitant to provide financing following Dubai debt woes.
    • Difficulties in obtaining loans from UAE banks drive some SMEs to look for investors to inject the money they need.
    • Bank loans to SMEs accounted for only 2 percent of total lending in Gulf Arab countries (Survey by Union or Arab banks and World Bank).
    • UAE is planning to bring a new law for SMEs.

    In Saudi Arabia

    • SMEs in Saudi Arabia represent almost 93 percent of total enterprises and account for about 24.7 percent of total employment. However contribution to GDP is low at only 33%.
    • Given the current gaps, the size and growth of Saudi Arabia’s economy and the nation’s focus on economic diversification, SMEs should contribute to more than 50 percent of the country’s GDP.
    • The reality is that the only effective way to expand the true economic potential of SMEs in Saudi Arabia is to launch a national SME Authority an independent public sector body which coordinates closely with govt and private organisations.
    • Saudi Hollandi Bank (SHB), has entered into an agreement with the IFC (International Finance Corporation ), a member of the World Bank, to provide a wide range of services to small and medium-sized enterprises (SMEs) in Saudi Arabia.
    • In June 2011 a number of businessmen signed an agreement to set up a SR100-million Endowment (Waqf) fund to support small enterprises and assist productive families finance their projects.
    • Kuwait has also proposed a bill for establishment of independent authority for SMEs.
    • In Oman Banks are bullish on SME Lending segment.
  5. What is the current scenario in SME business in Qatar?
    • Small and medium-size enterprises constitute a fledgling part (Just begin) of the economy.
    • Despite the success of a relative handful of companies such as iHorizons, the sector is considered weak.
    • Fewer than 40% of the existing small and medium-size manufacturing enterprises were established after 2000.
    • To support diversification SME development is necessary.
    • A strong culture of private sector initiative is normally characterized by a robust layer of small and medium-size enterprises.
    • Qatar’s small and medium- size enterprise sector constituting about 15% of the economy, with most firms focused on the domestic economy.
    • Qatar lays emphasis on SMEs that try and utilise raw materials and finished products in the country and those which rely on oil and gas.
    • The various incentives announced by the Ministry of Industry have been quite instrumental in accelerating industrial development in the country as small and medium (SME) industries are mushrooming.
    • Oil, gas and power are supplied to SME units at lower prices and many other incentives are made available which include tax holidays and exemption on customs duty.
    • Qatar’s strategic economic diversification drive is bearing fruit as the share of the manufacturing sector(THROUGH SME) in the country’s gross domestic product (GDP) is growing faster than expected and is set to double in the coming years.
    • SME business will also witness increase utilisation of technology such as Enterprise resource planning (ERP) and Customer Relationship management (CRM) implementation and video conferencing and mobile data and which will provide new challenges/ opportunities for software companies, telecoms and banks.
  6. What are the initiatives taken by Qatari govt to promote SME?
    • Enterprise Qatar, an early initiative linked to QNV 2030, will provide a focal point for stimulating services for small and medium-size enterprises and support diversification.
    • Its programme will be performance based, catalysing the delivery of services by the private sector to small and medium-size enterprises through vouchers and targeted grants.
    • Business skills development, incubation, marketing and other services would be supported.
    • Enterprise Qatar will also share risks with the private sector, through support for guarantees and participation in equity.
    • Although no sector would be excluded from its support, it will direct its energy towards knowledge-intensive businesses, focusing particularly on developing entrepreneurial skills among young Qatari men and women.
    • Enterprise Qatar will strengthen the SME business environment; making it more viable for SMEs to take a prominent role in Qatar’s economy.
    • Be the SME sector’s representative within Government; ensuring the key issues are heard and supported.
    • Become the SME gateway to business services; helping remove the obstacles and barriers of doing business.
  7. How are banks tapping the SME business market in Qatar?
    • Major Qatari banks have signed with Qatar development bank Al Dhameen” finance assurance Program for Small and Medium Enterprises (SME).
    • QDB’s support for SME’s embraces new and existing projects in different sectors, in compliance with the Qatar National Vision 2030.
    • QDB expected to provide lending to over one third of the Qatari SME sector by 2015.
    • The specifically designed “Al Dhameen” Finance Assurance scheme to support and boost the activities of the SME segment in Qatar.
    • This new financial scheme will allow an increase in lending volumes to local businesses at better terms therefore benefiting the business community under the SMEs.
    • The program is the result of extensive research and market studies conducted by QDB to assess current obstacles and challenges being faced by the SME sector, taking into particular account the potential contribution of this segment to overall economic growth and diversification.
    • Recently Mashreq Qatar has also signed agreement with QDB which indicates that regional players having branches in Qatar also evidence interest in SME segment.
  8. What are the global trends on Capital markets for SMEs?
    • In 2005 NYSE Alternext was created by NYSE Euronext to meet the needs of small and mid-sized companies seeking simplified access to the stock market .
    • NYSE Alternext is set to become the reference market for small and mid-sized companies throughout the euro zone.
    • In London we have AIM- London exchange which is the international market for smaller growing companies.
    • In May 2011 Bombay Stock Exchange (BSE) and NSE it has been granted an ‘in-principle’ approval by the capital market watchdog Sebi to launch an exchange exclusively for small and medium enterprises (SMEs).
    • France is all set to boost the presence of FRENCH small and medium size enterprises (SMEs) on the export side in Qatar.
    • SMEs to be listed in Kenya stock exchange as well as it seeks to diversify its revenue stream and pave way for SMEs to raise capital for growth and expansion.
  9. What is your outlook on SME Capital market in Qatar?
    • Qatar Exchange,  in association with Qatar Development Bank, Enterprise Qatar and Silatech, is creating a junior bourse for small and medium enterprises (SMEs) in a move that will give a substantial lift to the cash-starved sector.
    • The criteria for SMEs would be different from the currently-applicable requirements for listing companies in the main market.
    • The establishment of a junior market would give owners of SMEs an opportunity to be listed in the bourse in accordance with lighter and flexible regulations, in addition to giving them further finance sources to grow and expand their businesses.
    • The idea is to have a special market for SMEs, they would be able to raise a huge capital that could be used by them for growth.
    • Secondly, medium and small companies — especially the closed shareholding companies — would become quite efficient and their accounting standards will improve as they are subjected to disclosure and transparency norms.
  10. Provide some insights on financial reporting framework?
    • IFRS for SMEs is a modified and simplified version of full IFRS aimed for private company financial reporting users and easing the financial reporting burden on private companies through a cost-benefit approach.
    • It mainly covers SMEs, which are entities that publish general purpose financial statements for external users and do not have public accountability (Mainly those which are Listed or regulated).
    • IFRS for SMEs is geared toward private company reporting.
    • Users of the financial statements of SMEs are more focused on shorter-term cash flows, liquidity, balance sheet strength, interest coverage and solvency issues.