Unlocking new opportunities for SME lending in the GCC

Although the current numbers of SME employees in the GCC may be far below global averages, the ambition is not.

It can seem surprising in our globally connected, corporate world that over half of the world’s jobs are in small and medium-sized enterprises (SMEs). They are the engines of the global economy. But to thrive and grow, they need easy access to finance. This has proven a challenge in the Gulf Cooperation Council (GCC) region where only an estimated 11% have access to credit, and 40% name lack of financial access as a major hurdle. 

Although the current numbers of SME employees in the GCC may be far below global averages, the ambition is not.  

The GCC is moving fast to expand and refine its SME lending sector. And central to this transformation is data – more specifically the kind of data-driven insights that will drive this transformation and ease the credit flow to SMEs in the GCC.  

How data will kick-start change

Data has long been touted as ‘the new oil’. But in the financial sector it is not so much the raw data that matters, as its analysis.  

In the GCC where economies are diversifying and the financial sector modernising, effective data analysis is crucial. As the burgeoning potential of the SME sector is more widely recognised, the crucial need for more and better information becomes clearer. In a region where SMEs are still grappling with access to funds, the need for accurate risk profiles is suddenly in the spotlight. 

What is the ’right’ data?

But accurate risk profiles rely on much more than just numbers on a spreadsheet. Financial data, while crucial, does not paint the whole picture. To translate data into a rounded risk profile, you need a comprehensive understanding of the company, one that takes into account all the nuanced elements of its DNA – all the local factors that may affect its performance. Only by drawing from a far wider set of variables – from social data to economic indicators, can a richer, more detailed and ultimately more accurate risk profile emerge. 

This data-driven approach to risk assessment could revolutionise SME lending in the GCC. With more accurate and comprehensive risk profiles, lenders are already better informed. They can distinguish real from perceived risk and fine tune lending decisions, potentially freeing up vast sources of untapped capital for SMEs.  

Understanding the present, predicting the future

Financial information lies at the core of any company risk profile, but if the information is already outdated, that risk profile will never give a true picture. Accurate risk profiles demand live data. That is the only way to get a realistic view. In the dynamic economy of the GCC with its unique set of economic and geopolitical variables, access to live information allows decision-makers to make fast, proactive decisions in full confidence they are based on sound foundations. 

But the right data does not just allow an agile response in the present, it helps with making accurate predictions about the future. By leveraging data to foresee potential market fluctuations or identify business trends, financial institutions can adapt their lending strategies to stay one step ahead. 

The data toolbox 

A host of innovative new tools allow financial institutions to take a more proactive stance to SME investment. They offer the capability to: 

• Access a 360 view of the portfolio, enabling proactive management and instant adjustment 
• Access live data and real-time dashboards for the most accurate and comprehensive profile of every single company  
• Employ machine-learning models for rapid assimilation of data and automation of manual processes.  
• Navigate complex regulation with solutions that automatically comply and remain up to date with ever-changing regulation. 

These advanced tools have the capability to sift through vast quantities of data, drawing valuable insights that allow a nuanced response uniquely tailored to the situation.  

Benefits of a data-first approach in the GCC

By taking a data-driven approach to SME lending, financial institutions in the GCC will be better informed and able to make confident decisions. This in turn will ease the flow of capital into the SME sector and unleash its latent potential. 

But why is this the right approach?  

Razor-sharp accuracy

In the complex economic market of the GCC, it is critical that SME risk profiles are as accurate as possible. The conditions in different nations and sectors are wildly different so generalisations or estimations won’t cut it. 

Streamline operations

Automation is a game-changer. By leveraging the advantages of technology, processes are faster, simpler and more streamlined. In the complex economic landscape of the GCC this is crucially important for the right investments to be made. 

Stay ahead

The ability to spot trends and patterns in data put institutions at a colossal advantage. Through predictive analytics they can anticipate market fluctuations and how they will affect different sectors or individual companies, enabling the kind of proactive management style that will keep them one step ahead.  

Customised solutions

Given the unique economic conditions in different GCC countries, customised risk management strategies are essential. Financial institutions need the ability to understand how different conditions or market fluctuations will affect them individually so they can take the right defensive or offensive stance. 

Competitive edge

Having a good grip on the data gives organisations the edge. They can understand the specific situation of an SME at a granular level while also having the overview to adjust their lending strategy. Having the right data analysis allows them to look forwards as well as backwards, to understand the complete picture as well as to establish a new benchmark for SME lending across the GCC. 

A data-driven future

Arming up for a data-driven future requires commitment. There are potential issues with data quality, system integration and compliance with data protection laws. But the era of data-driven risk management is already with us. By embracing it wholeheartedly and working to develop a robust SME lending framework, the GCC is laying the groundwork for a vibrant and diverse economic future. 

To see how Wiserfunding can fire up your SME strategy, click here.