MANAMA, 21 August 2007 — The Labor Fund and Shamil Bank of Bahrain have announced the launch of an attractive financing scheme for small and medium enterprises (SMEs) in the Kingdom at a record low profit rate of 4 percent per annum (on a reducing balance).
“This financing plan will help such enterprises to enhance their productivity, allowing them to grow faster while at the same time providing job opportunities to Bahrainis.
“These are by far the lowest profit rates ever made available to SMEs by any bank or developmental organization in the Kingdom. The remarkable opportunity must be fully capitalized by businesses, and we are grateful that it was made possible through the cooperation of one of Bahrain’s leading financial institutions,” said Labor Fund acting chief executive Abdulellah Al-Qassimi.
“Making SMEs self-reliant and able to attract high-quality labor is an important part of the Labor Fund’s ongoing strategy to reinvigorate Bahrain’s labor market. Their prosperity is directly linked to the economic growth and job creation. At the same time, we are working to make Bahrainis the employees of choice by offering value-added training in order to create local competencies and skills in preparation for new job opportunities that are envisaged,” he added.
The financing scheme includes packages, ranging between BD10,000 to BD50,000, that will be made accessible to SMEs on a first come, first served basis. The pilot phase of the plan will serve a class of 50 applicants who meet the eligibility criteria.
The scheme is designed to improve SME’s access to low profit-rate financing. This, in turn, will trigger innovation and creativity, encouraging them to embark on business ventures, playing a greater role in economic development in the Kingdom.
Shamil, a member of the Ithmaar banking group, is providing Shariah-compliant financing to applicants who meet the eligibility criteria set by the Labor Fund and the bank.
The maximum financing amount for future recipients will be reconsidered during the second phase.
In total, BD12.5 million has been set aside to cover over the two-year life cycle of the initiative. The vital step comes as part of the Labor Fund’s ongoing efforts towards a labor-market reform that is an essential step toward improving the performance of businesses.
The financing is being offered at a discounted rate by Shamil and further subsidized by the Labor Fund with recipients being given a generous tenor of up to 10 years to repay them.
Bank chief executive and board member Mohamed Hussain said the bank was proud to play a role in such an important developmental project that will have a wide-ranging positive effect on the Kingdom’s economy.
“Shamil is well known and respected for being an innovator in structuring unique Shariah-compliant products and services, and this is no exception. But what makes the project special is the value that it will add to both the Bahraini private sector and labor market,” Hussain said. “Although SMEs are considered one of the riskier market segments, we believe that they are deserving of access to financing at a reasonable cost. We are investing our resources, in partnership with the Labor Fund, to help make this happen,” he added.
The applicant’s eligibility criteria have been set to comply with two dimensions: the Bahrainisation level as well as a percent of Bahraini ownership of the SME. A Bahrainisation level of 20 percent — or 10 percent for construction companies — must be satisfied when the Bahraini ownership for the enterprise is more than 50 percent. On the other hand, for enterprises in which Bahraini ownership is less than 50 percent, a minimum of a half Bahrainisation level must be met.
Eligible SMEs must show strong potential and be at least one year old. They will need to submit their audited accounts to the bank and business plans may also be required for financing over BD50,000.
