Jeddah/Riyadh, January 30, 2008—Lars
Thunell, Executive Vice President and CEO of IFC, a member of the World
Bank Group, today underpinned the importance of expanding access to finance
to smaller businesses. Addressing the banking community in Saudi Arabia
during an SME finance conference, he said, “Small and medium enterprises
are major contributors to employment, yet their financial needs are underserved,
which is hindering their growth.”
Organized by the Institute of Banking and hosted by H.E. Hamad Al-Sayari,
Governor of the Saudi Arabian Monetary Agency, the conference discussed
ways to encourage SME banking in Saudi Arabia and the region as a whole.
“Banks generate higher profits from their SME lending than from their
other portfolios, but many banks remain wary of this sector due to its
perceived risk. IFC is helping banks approach SME lending in ways that
enable them to manage potential risk,” Thunell said.
IFC primarily finances small businesses indirectly, through financial intermediaries
such as investment funds and local financial institutions, including commercial
banks, microfinance institutions, and leasing providers.
Over the past five years, IFC’s investments in financial institutions
have increased fivefold, to nearly $2 billion in fiscal 2007. In 2006,
these institutions disbursed close to 9 million loans, totaling more than
$96 billion. IFC’s advisory services also play an essential role in SME
financing, from helping clients develop new products to setting up full
SME banking operations in commercial banks.
Starting and expanding a small business is one of the most important routes
to sustainable economic growth. A vibrant small business sector also provides
consumers with options and generates tax revenue to help improve public
Thunell is on his first visit to Saudi Arabia since he joined IFC in 2006.
The visit highlights IFC’s continuing commitment to its well-established
partnership with Saudi Arabia, as well as the recognition of the country’s
reforms toward developing the private sector. Saudi Arabia has one of the
most active private sectors in the Middle East and North Africa. In FY07,
more than 25 percent of IFC’s total commitments in the region were with
Saudi businesses that are expanding in the region. IFC has established
a presence in Saudi Arabia and will continue to expand. So far, IFC has
committed more than 500 million riyals ($130 million) in key sectors, including
housing, insurance, and leasing.
Thunell’s agenda includes meetings with government officials and discussions
with representatives from the private sector. He will also sign a
public-private partnership agreement with the General Authority of Civil
Aviation to work closely with the government in developing three “airport
cities” under private sector participation schemes in Dammam, Jeddah,
IFC, a member of the World Bank Group, fosters sustainable economic growth
in developing countries by financing private sector investment, mobilizing
private capital in local and international financial markets, and providing
advisory and risk mitigation services to businesses and governments. IFC’s
vision is that poor people have the opportunity to escape poverty and improve
their lives. In FY07, IFC committed $8.2 billion and mobilized an additional
$3.9 billion through syndications and structured finance for 299 investments
in 69 developing countries. IFC also provided advisory services in 97 countries.
For more information, visit www.ifc.org.