| 23 February, 2017

GCC firms 'should tap' non-bank options for funds

Image used for illustrative purpose. A woman counts U.S. dollars at a money changer in Yangon

Image used for illustrative purpose. A woman counts U.S. dollars at a money changer in Yangon

REUTERS/Soe Zeya Tun

23 February 2017
GCC businesses should explore alternative non-bank options available in the region to raise funds, rather than relying just on traditional sources of capital. Non-bank options include mezzanines, convertibles, equity and debt, said the experts during the roundtable discussion on raising capital in the GCC.

The roundtable was organised by ICAEW’s Corporate Finance Faculty at the JW Marriott Marquis Hotel in Dubai last week. Experts discussed trends and challenges in managing liquidity and raising capital in the GCC.

ICAEW is a professional membership organisation that promotes, develops and supports over 147,000 chartered accountants worldwide. 

Panellists included Anthony Pallett, Partner, Hogan Lovells; Fidaa Haddad, Managing Director, Gulf Capital Credit Partners, Gulf Capital PJSC; Kosta Georgiadis, Debt Advisory, Deloitte; and Kushal Shah, Managing Partner, Roland Berger. The discussion was moderated by Sam Surrey, Principal Director, Deloitte.

Following an introduction by Matthew Benson, Partner Transaction Support Leader, Europe, Middle East, India and Africa (EMEIA), EY, panellists and invited guests discussed whether liquidity is available in the GCC region and what challenges businesses face when it comes to raising funds. Panellists agreed there is plenty of liquidity in the market if all sources of capital are considered.

Speakers explained that there is an evolving pool of capital for borrowers, which includes mezzanines, convertibles, equity and debt. However, borrowers have to be ready to satisfy the requirements and proposals from these non-bank sources in order to be able to raise funds. 

Panellists clarified that the challenges facing borrowers when raising funds from financial institutions are: a lack of education amongst borrowers about the application process and requirements, poor corporate governance and the complicated legal or corporate structure of their business.

“The financial sector in the GCC has evolved over the past 10 years and this can clearly be seen by the alternative sources of funding available now in the region as well as the myriad number of initiatives to support the SME sector. However, the GCC region is still behind other regions in terms of corporate funding via institutions or debt funds. A cultural change is required to increase business willingness to share equity,” said Michael Armstrong, FCA and ICAEW Regional Director for the Middle East, Africa and South Asia (MEASA).

Speakers also agreed that banks are continuing to lend to businesses that have predictable or tangible cash flow. Banks are still keen to lend to businesses in education, health care, oil & gas and aviation.

Panellists noted that banks are collaborating with each other to understand the SME market. They are stepping out of the regulatory arena and are trying to be innovative. For example, banks are trying to be flexible with their customers who have bank unsettled payments or cheques by giving them a 15-day grace period in which to come up with a payment plan before taking legal action.  

The event was attended by close to 100 ICAEW members and senior business representatives from the major global and regional financial organisations.

© The Peninsula 2017