Dubai: Emirates Development Bank (EDB), the premier development financial institution in the UAE has the mandate to be a key financial enabler of economic diversification and industrial transformation.
For Ahmed Mohamed Al Naqbi, the Chief Executive Officer of EDB, the agenda of EDB is also closely linked to a personal transformation from a career in commercial banking to a developmental banking role, where profit generation is not the primary motive.
Appointed in May 2021, Al Naqbi now drives EDB’s strategy to support the UAE’s economic diversification plan, industrial growth and adoption of advanced technologies.
“As a development bank and an enabler of entrepreneurship and innovation in the country, we will be going beyond where commercial banks go. Our criteria for financing a project or business will not be driven by profits alone. We are keen on taking on risks that commercial banks would avoid purely on business rationale,” said Al Naqbi.
Al Naqbi will be driving the organization to focus on innovation and digitization, enhancement of products, services and capabilities along with promoting technology solutions, delivering best-in-class customer experience, and easing access to finance for individuals, small & medium enterprises as well as corporates in priority industry sectors.
He brings a unique background to EDB as he served in multiple managing director roles across both retail and corporate banking. He led Infrastructure & Transformation for FAB’s Markets business, and was the Regional Head of Abu Dhabi Emirate during the bank’s recent merger. He previously led National bank of Abu Dhabi’s Family conglomerates and real estate sector for their corporate bank. He also led the retail-banking segment and has set up the first banking innovation lab and several strategic business ventures for NBAD.
Ahmed chaired the UAE Banking Federation’s Markets Committee in 2020. The committee played a critical advisory role to the UAE’s central bank in tackling the challenges posed by the COVID -19 pandemic, as well as in strengthening relationship between the UBF and CBUAE. Ahmed is an alumni of Harvard Business School and Virginia Tech’s school of architecture and urban studies.
Major source of SME funding
EDB is fast emerging as a major source of funding for small and medium enterprises (SMEs) in the country. In recent months, the bank has signed a number of agreements with leading commercial banks in for providing financing to the SME sector through credit guarantees and co-lending schemes.
The SME segment accounts more than 90 per cent of companies in the UAE, employing about 86 per cent of the country’s private sector workforce, and accounts for more than 50 per cent of the non-oil GDP. Yet, when it comes to bank funding, the aggregate SME lending to the banks account for about 6 per cent of the total bank lending.
The SME sector in the UAE had been facing serious funding gap in recent years. Sharp decline in the oil prices between 2014 and 2017 that resulted in a rupture in payment cycles across the private sector saw many SMEs defaulting their loan obligations and many business failures contributing to banks’ loan losses.
Faced with the surge in non-performing loans, many commercial banks became risk averse towards SMEs. During 2016 -18 period, many banks restructured their balance sheets that focused on deleveraging from SMEs in favour of larger corporates and government related entities (GREs). Clearly, that switch in loan portfolios of banks saw the SMEs facing funding squeeze across the board.
“Commercial banks have their limitations in risk taking as their managements are responsible to their shareholders. Ultimately that restricts their risk appetite. On the contrary we have a different mandate to fund businesses as part of the national agenda to support economic diversification and entrepreneurship,” said Al Naqbi.
Working with banks
EBD’s recent agreements with leading commercial banks in the country are expected to ease funding squeeze to the SME sector and new entrepreneurs. These agreements work as credit guarantee and or co-lending schemes where 50 per cent of the risk of a loan is underwritten by EDB.
Additionally, the credit guarantee programme also aims to support UAE citizens in their startup journey by offering financing of up to Dh1million, wherein 60 per cent is guaranteed or co-lent by EDB.
The funding through this channel will support customers of commercial banks with funding for expenses towards activities such as the purchase of equipment and fixtures, construction of work premises, business expansion, purchase of inventory, supplies and raw materials as well as general financing needs for payments such as salaries or rent.
The recent agreements with commercial banks are part of EDB’s focus to enhance the contribution of SMEs to the country’s GDP. Under this scheme EDB offers a mix of Capex as well as working capital facilities to SME customers through commercial banking channels.
“As a development bank, our role in the banking sector is not to compete with commercial banks for customers. We want to collaborate with them in enabling entrepreneurship while taking substantial share of risks on to our books,” said Al Naqbi.
Projects of the 50
EDB will be playing a key financing role in the recently announced Projects of the 50 schemes that targets industrial development, technology adoption and job creation for the UAE nationals.
The bank will be financing a total of Dh10 billion for two major schemes under the Projects to the 50 from its April 2021 allocation of Dh30 billion.
While Dh5 billion will be allocated to help accelerate industrial development, adopt advanced technology, and support entrepreneurship and innovation by 2025, these funding schemes will support EDB’s mission of increasing productivity, enhancing the industrial sector’s contribution to GDP and creating job opportunities for UAE’s citizens.
Supporting emerging Emirati businesses follows a forward-looking vision to diversify the economy and improve competitiveness, considering that SMEs in the UAE constitute a major part of the national economy.
The second Dh5 billion project named ‘Tech Drive’ will further prepare the country for the Fourth Industrial Revolution by furthering the UAE’s economic diversification and industrial transformation.
Through providing the necessary financing for companies and industrial institutions seeking to adopt the applications of the Fourth Industrial Revolution, Tech Drive aims to establish an attractive business environment for local and international investors and support the growth of national products.
The fund’s packages include financial and non-financial programmes, direct and indirect lending, capital investment in emerging and small and medium-sized companies, and advisory and guidance services.
The bank recently launched EDB Business Banking app in partnership with YAP, a UAE-based fintech, to support small and medium-sized enterprises operating in the UAE.
The EDB Business Banking app offers SMEs access to 24x7 secure, convenient, on-the-go digital banking services. With the app, the business account IBAN is reserved in a matter of minutes and account activation completed in 48 hours. The account is free to all, across all Emirates, with no minimum balance criteria.
“We have listened to SME’s challenges and have integrated every aspect of their needs into our business banking experience, completely transforming their ability to get their business up and running quickly and efficiently,” said Al Naqbi
EDB’s Business Banking app will offer a comprehensive suite of banking facilities including; a fully operational business bank account, bill payments, invoicing, budgeting and analytics.