Fahad Al Khalifa, Group CEO, Al Khaliji: Interview

Interview: Fahad Al Khalifa

Do you expect infrastructure financing to continue playing a key part in local financing in 2016?

FAHAD AL KHALIFA: The government has indicated that it remains committed to executing its $200bn development plan, in spite of the reduction in oil prices. Non-essential capital projects will be assessed on their merit, and possibly delayed or scaled back. However, associated 2022 FIFA World Cup projects are most likely to continue as planned.

Therefore, there is no doubt that infrastructure financing will continue to play a key role. The government will spend almost $30bn in 2016. Of course, speed of delivery and efficiency are key, as is risk sharing, and to this extent many will be carried out via public-private partnerships, thereby creating great opportunities for both local and international banks to provide the necessary project financing.

Given that economic diversification is set to play a more crucial role, where do you see the greatest need to further supplement private sector credit?

AL KHALIFA: Qatar’s diversification efforts are paying off, a fact that has recently been praised by Christine Lagarde, managing director of the IMF. Non-hydrocarbons made up 62% of GDP in 2014, and this sector has been growing consistently at 10-11% annually since 2011. The Ministry of Development Planning and Statistics, in its economic outlook 2015-17, has stated that the sector will continue to account for most of the economy’s expansion.

The financial sector plays a pivotal role, not only as one of the sectors leading economic diversification, but also as a pillar for the growth of all other emerging sectors. Qatari banks will continue to uphold their three-fold focus and growth strategy, which involves extending large credit facilities to contractors and companies involved in large infrastructure projects and investments; supporting export-oriented businesses through the provision of export insurance guarantees and financing for companies with cross-border trade activity; and enabling small and medium-sized enterprises (SMEs) – particularly those in trade and high-value industries – to raise funding and obtain financing as they scale up their operations. It is an all-encompassing strategy that covers each facet of economic diversification.

What do you think of the banking sector’s overall efforts to support SMEs in the region?

AL KHALIFA: SMEs are the bedrock of any successful economy. They innovate and have a big effect on employment and the efficient utilisation of resources. Globally, 90% of businesses are SMEs, generating nearly 80% of job opportunities. In Europe, they account for 85% of all new jobs and 60% of GDP. This is in contrast to the GCC, where SMEs represent 90% of the private sector and 50% of its workforce, but only 40% of GDP. This is because they are concentrated in low-profit, low-tech sectors. Qatar, like its GCC neighbours, has been actively driving a policy of economic diversification for some time, with a view to providing the right foundations for the private sector to develop existing business and for new start ups to move up the value chain and become a more significant contributor to the local economy.

Access to financing is generally perceived as a constraint, mainly owing to the fact that SMEs lack financial information, verifiable credit and business history. However, the funds are there. The question is not if the financing is available, but how to secure it. An SME is different from a large institution in three main aspects: uncertainty, innovation and evolution. The SME needs to present, and communicate, a clear-cut business plan that eliminates or minimises uncertainty, highlights its innovation and explains its evolution. Qatar’s financial institutions tend to be conservative; however, they are fully willing to engage with small business once this knowledge gap is closed.