Kuwaiti banks avoid financing 18 sectors

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KUWAIT CITY: In a revealing survey conducted by the Central Bank of Kuwait, the financing preferences of Kuwaiti banks were laid bare. The survey highlighted 18 sectors that banks find undesirable for lending, including small and newly established projects, administrative services, and exchange companies.

In contrast, there were 17 sectors that banks actively preferred to finance, alongside five sectors that remained neutral in the eyes of lenders. Among the favored sectors were oil and gas, state tenders, consumer products, food, educational services, environmental, social, and governance (ESG) contracts, and infrastructure-related activities.

Additionally, industries like public services, healthcare, manufacturing, renewable energy, and children’s entertainment cut. On the flip side, sectors such as micro-enterprises, consulting, small retail shops, transportation, and administrative services were deemed less favorable. Sectors like restaurants, retail, tourism, travel, and real estate were classified as neutral in terms of financing potential.

The reluctance to finance certain industries stems from several challenges. Banks cited high credit risks, lack of adequate collateral, weak financial data, and intense competition as key reasons. There were also concerns about inexperienced entrepreneurs and the difficulty in evaluating the performance of newer projects. The sources shared that while some banks offer financing starting from 50,000 dinars for small business owners, others provide up to 500,000 dinars or more, depending on the institution.

Despite this, financing small and medium-sized enterprises (SMEs) remains challenging due to 20 factors identified by banks which include regulatory obstacles, lack of guarantees, difficulty in assessing performance, and issues with collecting debts. In response to these hurdles, banks proposed several solutions. These included offering training and advisory services for entrepreneurs, ensuring businesses have proper financial management, providing guarantees for loans, and creating laws that allow banks to recover debts more efficiently.

Additionally, banks suggested the development of financing products tailored to the needs of entrepreneurs and lowering the cost of financing for small projects. With these measures in place, the financial landscape for small businesses in Kuwait could shift, making it easier for entrepreneurs to secure the funding they need. However, the competition and challenges they face in the broader market will still require innovation, careful planning, and support from both financial institutions and government bodies.