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A Very Helping Hand

LEBANON - Economy

A Very Helping Hand

Chairman of the Board of Directors & General Manager, Kafalat


Khater Abi Habib holds a BA in economics, an MA in economics and governmental studies, and a PhD in government and social anthropology, all from the University of Manchester. He occupied the positions of Delegated Member of the Board of Directors and then Vice President of the Lebanese Swiss Bank. He is currently the Chairman and General Manager of both the National Institute for the Guarantee of Desposits and Kafalat.

TBY talks to Khater Abi Habib, Chairman of the Board of Directors & General Manager of Kafalat, on riding out a rough 2017, providing assistance to SMEs, and boosting development across the country.

How have the last 18 months been for Kafalat in terms of revenues, loan disbursements, and profits?

In 2016, we adopted the IFRS 9 system. Taking all risks into account, it was the first time the company incurred serious losses. We had been accumulating profits over the last 15 years, though we never distribute these profits. We set them aside in anticipation of difficult periods and use them to carry more risks. We started with equity of LBP20 billion (USD13.3 million), and our equity is now over LBP100 billion (USD66.5 million). We incurred losses in 2016 due to the impact of the Syrian war and difficulties with Gulf tourism. Additionally, the oil crises impacted Lebanon significantly because we are, indirectly, an oil country. We have a great deal of remittances coming from the Gulf, as well as substantial activity in places like Iraq, West Africa, and Central Africa. Lebanese interests in northern South America and the Caribbean were also greatly affected by oil prices, the fall of which has been a burden on our markets. This caused ripple effects in other parts of the economy, impeding normal trade routes. We now feel more comfortable.

What are the criteria set by Kafalat to finance SMEs?

By giving our guarantee, we encourage banks to participate more in this area. However, we are also practical about things. We give guarantees to 75% of applications that come to us, which is fairly substantial. However, it is not only the financier who studies the file; we also go over the application and request for any missing documents or information. We make a relatively simple decision after this, because most of the work has been done. We make sure that smaller producers receive the financing they need. We give our guarantee to firms that employ 40 people or less as well as to start-ups that have high chance of success. The minority are start-ups, representing over 10%, while the rest are small firms. We support agriculture, high technology, tourism, and traditional crafts. Our criteria are largely banking criteria, and if the firm applying for financing has a solid model and a great chance of success, we are happy to participate. By forming a relationship with SMEs early on, we ensure we have strong bonds with the corporate leaders of tomorrow.

How is growth in Lebanon progressing currently?

Lebanon’s economic pace has been slowing down since 2011, when the war in Syria started. In 2013, the slowdown increased, because we had internal issues and problems with Gulf countries, and the oil crisis further strained growth. There has been a slight uptick in growth recently, though it is marginal because people are still waiting to see what will happen in the region and country. The Central Bank’s decisions, which have eased financing in a number of areas, might have been too aggressive. I suspect that interest rates will drop somewhat. People want to see how the new government will develop its policies.

What does Kafalat provide in terms of tools for SMEs to grow?

We provide lending guarantees; other forms of work are not our purview. As a partial lender, we cannot make judgments on behalf of the borrower. However, our staff and institution help other institutions that provide support for SMEs. We have, for example, staffers who work with the Tripoli Chamber of Commerce to support SMEs. We also have employees who run institutions dedicated to helping entrepreneurs in Tripoli and so on. We interact with many entrepreneurial societies as volunteers with the intention of supporting SMEs and critically assessing development across the country. We are able to use our staff and initiatives to improve the broader market, though we do not directly train any SMEs. By indirectly interacting with people, we are able to facilitate the expansion of their knowledge in ways that do not create any conflicts of interest.



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