MENA Banks Go Digital to Power SME Growth
For SMEs across the MENA region, accessing finance has often felt like an uphill battle. Despite being the backbone of these economies, many SMEs struggle to secure the funding they need to grow and even operate.
The numbers paint a clear picture. Globally, formal MSMEs in developing countries face an unmet financing need of a staggering US$5.2 trillion annually. That's a huge gap, and in MENA, it's particularly pronounced, reaching 88 percent of potential demand.
The Banking Conundrum
So, why the disconnect? Carlos Teixeira, Head of Business Development and Strategy, Lending at Finastra, points out some key challenges banks face. He explains that things like outdated infrastructure, high servicing costs, increased credit risk, and scattered data make it tough for banks to accurately assess an SME's creditworthiness and process loans efficiently. This often leaves SMEs relying on their own funds or informal sources, which can limit their potential.
It's not that banks don't care. Finastra's 2024 Financial Services State of the Nation Survey found that a significant 87 percent of financial institutions globally believe improving access to finance is part of their responsibility. The good news is, they're starting to act.
The Digital Shift
A major shift is happening with the adoption of cloud-native platforms, API-based architectures, and AI. Countries like the UAE and Saudi Arabia are already making strides in modernising their banking capabilities. This modernisation can lead to faster and more scalable lending, which is crucial for SMEs.
Carlos Teixeira emphasises that a "simplified servicing approach" for lending is becoming a top priority for banks looking to better serve SMEs. By automating workflows, using data analytics, breaking down internal barriers, and integrating digital channels, banks can cut costs, improve how they assess credit, speed up processing times, reduce risk, and offer more personalised support.
This isn't just about helping SMEs; it's also a smart business move for banks. Simplified models allow them to serve more SMEs profitably, compete more effectively with newer financial technology (fintech) companies and private credit providers, and even open up new revenue streams. Plus, by expanding access to credit, banks play a vital role in closing the finance gap and strengthening the region's economy.
Collaborating for Success
To extend their reach and boost efficiency, banks in the MENA region are also teaming up with fintechs and other third-party providers through digital ecosystems. These collaborations can, for instance, enhance risk modelling, provide access to different data sets, and streamline credit assessment processes. This allows financial institutions to offer more credit while still maintaining careful risk controls.
The impact of these changes is already visible. In 2024, SME credit in Saudi Arabia saw a notable increase of 27.6 percent to USD 94 billion. Similarly, in the UAE, SME lending reached USD 22.1 billion by mid-year. These developments are a testament to the ongoing efforts to bridge the financing gap using technology-enabled servicing models.
Finastra continues to work with financial institutions across MENA, helping them modernise their SME lending capabilities and ultimately, expand financial inclusion for businesses throughout the region.
