In the Middle East and North Africa (MENA) region, small and medium-sized enterprises (SMEs) are the backbone of the economy, accounting for 96 percent of all registered businesses.
However, accessing funding has been a huge problem for SMEs as they are often overlooked by regular banking organisations.
They generally prefer to do business with larger enterprises, mainly because smaller ones struggle to meet the stringent conditions they set.
Thankfully, advancements in financial technology (fintech) is helping to bridge the funding gap and support SMEs across the MNEA region.
The Challenges Facing SMEs
One of the prevalent challenges SMEs in MENA face is the lack of comprehensive creditworthiness assessments.
Many SMEs don’t maintain accurate financial records or credit histories, so it is difficult for lenders to evaluate risk properly.
The outrageous lending conditions laid out by regular banks does not help. They usually demand ridiculous collateral and also have a rigorous approval process.
That automatically rules out SMEs whose smaller loan requests are shelved in favour of larger deals.
The scale of the problem is reflected in World Bank data, where SMEs receive just 8% of total lending across MENA and an even lower rate of 2% in Gulf Cooperation Council (GCC) countries.
But that’s not the only reason why SMEs struggle to access funding. SMEs are notorious for lacking financial management skills, which is largely down to limited financial literacy.
Without a proper financial infrastructure, SMEs rely on manual or outdated methods to keep track of their finances, which makes it even more challenging to monitor cash flow effectively.
Speaking of cash flow, many SMEs struggle with delayed payments and lengthy receivable cycles, which further impact their already fragile financial health.
They also lack real-time financial insights, which impacts planning and decision-making and exposes them to market volatility and other operational risks.
Fintech to the Rescue
Fintech’s arrival on the scene is a breath of fresh air for SMEs as they offer faster and more accessible solutions when compared to regular banks.
They use data analytics and other credit scoring methods to assess risk, making it easier to approve loans without asking for impossible collateral.
Their approach has been a game-changer for start-ups and other SMEs in technology, logistics and eCommerce sectors, which often grows faster than the banks’ ability to provide funding.
Government initiatives in the GCC have also helped. Institutions are stepping up to the plate by partnering with fintech companies to drum up support for SME initiatives.
Bahrain’s Fintech Bay and Saudi Arabia’s SAMA regulatory sandbox are perfect examples. They have created a conducive environment for fintech companies to develop and test their products.
Fintech companies have also rolled out new financial products that offer SMEs a lifeline whenever accessing funds from banks becomes too difficult. These alternative funding sources don’t use the traditional collateral-based lending model.
They utilise digital platforms that provide SMEs with a faster, more transparent and user-friendly way to obtain funding without having to worry about paperwork or physical appointments.
How iGaming fits into the Fintech Sector
Fintech is making significant inroads into the iGaming sector in the MENA region.
The United Arab Emirates (UAE) have ditched their conservative outlook regarding gambling to establish a regulatory body to oversee the commercial gaming sector.
Wynn Resorts was granted the first commercial gaming operator’s license in the UAE by the General Commercial Gaming Regulatory Authority (GCGRA) last October.
That was the start of what has now become a full-blown legal gambling system in the UAE. While they’re yet to touch on the digital realm, it’s only a matter of time before the best Arab casinos online will be operating under GCGRA control.
Since Wynn acquitted their license, a slew of other companies have lined up behind them. They include PayBy, who became the first fintech platform to secure a Gaming-Related Vendor License from the GCGRA.
The license gave the UAE-based platform the green light to provide financial services to GCGRA-licensed gaming operators, including digital wallets, secure payments and fraud detection systems.
Other digitally empowering solutions for SMEs
SMEs benefit from a wide range of advantages offered by fintech companies. Open banking-powered lending allows lenders to assess real-time financial data and issue loans based on cash flow rather than collateral.
Automated accounting tools enable businesses to manage expenses, generate invoices and improve financial planning, thereby reducing manual tasks and increasing efficiency.
Digital payment solutions have also revamped how SMEs handle transactions.
Alternative funding models, such as crowdfunding, inventory financing, and buy now pay later (BNPL), provide SMEs with plenty of options so they don’t have to rely on bank loans.
Crowdfunding has become a particularly crucial resource for entrepreneurs in North Africa, especially for start-ups that are struggling to get off the ground.
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