George Richani, CEO, Al Ahli Bank of Kuwait

On leveraging innovative technologies to facilitate economic diversification and small business financing

What can local banks do to provide more support for economic diversification, and which sectors have the greatest potential to catalyse growth? 

GEORGE RICHANI: Diversification efforts are moving ahead in line with the New Kuwait 2035 vision, even though the pace of economic transformation still relies largely on oil prices. This means that in the short term, diversification efforts may be slower than anticipated, and we expect to see considerable government measures in this area when oil prices begin to decline. 

Moving forwards, it will be beneficial for Kuwait’s economic development to have a long-term strategy in place irrespective of oil prices. There must be a consensus among all stakeholders in order to achieve this. This is the challenge that Kuwait faces at present, and we look forwards to seeing faster developments to promote and facilitate growth in the non-oil sector.

Banks are an essential part of Kuwait’s economic fabric, and this will undoubtedly continue to be the case in the future. Banks act as enablers and catalysts for the local economy. However, we are eager to see clearer and stronger directives in order to diversify the economy further, with firm strategies, rules and regulations in place that are focused on high-potential sectors. As long as Kuwait’s economy continues to depend on oil prices, banks’ capacity to facilitate diversification will be limited. 

How can banks leverage innovation and disruptive technologies to boost transparency and efficiency in their operations?

RICHANI: In order to understand how local banks are implementing innovation and disruptive technologies, one must first understand the country’s demographics. Almost half of the population is below the age of 25, which means that Kuwait is extremely young by global standards. This represents an area of opportunity for banks in terms of digitalisation. This young population should continue gravitating towards digital products and solutions, considering that the internet penetration rate in Kuwait is among the highest in the world, and that our ICT infrastructure is advanced.

We have seen banks significantly advance the use of innovative tools to serve their clients better. Given the rapid pace of change in technology and digital innovation, we understand that this is a continuous process that requires constant investment and upgrades to cater to changes in demand.

By what means can small and medium-sized enterprises (SMEs) be better supported to secure financing in an uncertain economic environment?

RICHANI: There are approximately 40,000 SMEs in Kuwait, with such companies defined as entities with annual turnover below KD2m ($6.6m). Empirical evidence shows that SMEs are a significant contributor to economic diversification globally. This is also the case in Kuwait, where SMEs have become an integral part of the government’s agenda. The government has improved and facilitated SME financing through different mechanisms such as the National Fund for SME Development. However, responsibility for fostering their growth and development also lies with financial stakeholders like local banks.

That being said, there is an inherent risk involved in SME lending, and we strongly believe that such risk could be largely mitigated through more flexible and lenient regulations in terms of the ease of doing business and related bureaucracy. Improving Kuwait’s performance in these areas would support the creation and growth of businesses, which, in turn, would improve our ability to finance their activities.

Where do you stand on the potential for synergies or competition with financial technology (fintech) firms in the pursuit of enhanced customer experience and service provision? 

RICHANI: Digital channels and tools are advancing rapidly in Kuwait’s financial services industry, and we can already see a full digital ecosystem emerging, spanning online banking, insurance, and capital market products and services. The use of digital tools has become a lifestyle choice, with the smartphone serving as a one-stop-shop for all financial operations. The country’s mobile banking activity and demand is among the highest in the world, and collaboration with the fintech world must therefore be encouraged. 

Regulations have been advancing in this regard – for example, in the arena of online payments. In addition, in February 2022 the Central Bank of Kuwait issued comprehensive guidelines for the establishment of digital banks according to three main models: a unit within a traditional bank; a standalone digital bank; and a partnership between a traditional bank and a digital institution. These regulations add clarity to the means by which further collaboration can happen.

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