HSBC
is putting many small business owners on notice that they have two months to find a new lender after conducting an internal review.
One 14-year customer of the bank being forced to close his account said the bank had an "obligation to service the community" and not just use them to make profits.
"HSBC has been conducting a review of all its businesses since May 2011, to meet its goal of streamlining the business and improving the return on capital. As part of this, the bank is reviewing its portfolio of small business customers in the UAE," the bank said.
The bank stressed that it would not stop lending to small businesses, to which it has allocated almost US$500 million during the past three years.
The tightening of lending criteria comes as local lenders, including Emirates Islamic Bank, RAKBank and Doha Bank, target small and medium-sized enterprises (SMEs), which are supported by policy initiatives to drive growth of the sector most closely linked to job creation.
HSBC said it was assigning higher priority to businesses that operate overseas "or intend to in the near future". It was also assigning dedicated relationship managers to assist customers, but also to meet "increasingly rigorous compliance and risk standards".
HSBC has recently closed UAE accounts belonging to Syrian, Iranian and Sudanese nationals because of the increasing difficulty of meeting compliance standards.
The bank paid $1.9 billion in penalties to US authorities last year after a critical report highlighting years of lax anti-money laundering controls. HSBC has apologised for its past errors and says it has made compliance a key plank of its strategy ever since.
HSBC's sudden tightening of lending rules comes as banks aggressively target small businesses for lending growth.
Banks have piled into lending to a section of the economy that is underserved and faces less regulatory uncertainty than retail lending or financing for large government-related entities, both of which were the subject of regulatory drives during the past three years.
Small-business lending, by contrast, has been supported by recent policy initiatives.
The FNC passed a law on Tuesday which compels federal authorities and ministries to set aside 10 per cent of their procurement budgets for small businesses.
The measure would give banks more comfort in lending to small businesses, said Giyas Gokkent, the chief economist at National Bank of Abu Dhabi. But the support from the Government was encouraging banks to funnel their capital towards small businesses at a time when lending to other segments of the economy was becoming more difficult, he added.
Trade credit - which includes SME lending, but also lending to larger companies - rose by just 0.7 per cent to Dh106.2bn last year, according to data from the Central Bank.
Doha Bank said last month it would earmark $1.5bn for lending to SMEs and corporate clients, while Emirates NBD launched a new social network for entrepreneurs.
The UAE Banks Federation, meanwhile, has launched a working group intended to help increase access to credit for small businesses in the Emirates.
ghunter@thenational.ae
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About Proto21
Date started: May 2018
Founder: Pir Arkam
Based: Dubai
Sector: Additive manufacturing (aka, 3D printing)
Staff: 18
Funding: Invested, supported and partnered by Joseph Group
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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Charlotte Gainsbourg
Rest
(Because Music)
Cryopreservation: A timeline
- Keyhole surgery under general anaesthetic
- Ovarian tissue surgically removed
- Tissue processed in a high-tech facility
- Tissue re-implanted at a time of the patient’s choosing
- Full hormone production regained within 4-6 months
The specs
Engine: 2.9-litre, V6 twin-turbo
Transmission: seven-speed PDK dual clutch automatic
Power: 375bhp
Torque: 520Nm
Price: Dh332,800
On sale: now
The specs: 2018 Harley-Davidson Fat Boy
Price, base / as tested Dh97,600
Engine 1,745cc Milwaukee-Eight v-twin engine
Transmission Six-speed gearbox
Power 78hp @ 5,250rpm
Torque 145Nm @ 3,000rpm
Fuel economy, combined 5.0L / 100km (estimate)
Company profile: buybackbazaar.com
Name: buybackbazaar.com
Started: January 2018
Founder(s): Pishu Ganglani and Ricky Husaini
Based: Dubai
Sector: FinTech, micro finance
Initial investment: $1 million
A State of Passion
Directors: Carol Mansour and Muna Khalidi
Stars: Dr Ghassan Abu-Sittah
Rating: 4/5
