The SME segment in the GCC region has been beset by a lack of access to credit with only 20% of SMEs having access to a loan or line of credit in spite of accounting for up to 80% of the businesses in the Arab region (source: Arab Monetary Fund). The COVID-19 pandemic has only exacerbated this challenge by compounding SMEs’ credit quality issues and adversely affecting their operating buffer resulting in an overall apprehension around their business sustainability. In this context, banks in the GCC region will need to relook at and, in some cases, completely revamp their existing operating models for SME lending. Combined with the national-level initiatives launched by many GCC economies to support growth of the SME segment and the significant competitive advantage that early-mover banks are likely to benefit from, the post-COVID-19 era may provide the right occasion for banks to leverage the SME lending opportunity and expedite initiatives for an operating model revamp.
This paper explores the key impact areas across the credit lifecycle that may need to be reviewed as part of such a revamp, and how recent advances in digital technologies may help banks achieve the required transformation, thus leading to an enhanced SME lending ecosystem.