Friday, March 29, 2024 | Ramadan 18, 1445 H
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EDITOR IN CHIEF- ABDULLAH BIN SALIM AL SHUEILI

Role of banks in financing small projects

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haiderdawood@hotmail.com -


Banks in emerging countries are keen to finance micro and medium-sized enterprises promoted by entrepreneurs and start-up business owners with the patented to become large institutions. We in the Sultanate and the Arab region have many young people who are distinguished in presenting creative ideas, doing research and studies, and entering into productive operations. But these young people need funds to purchase machinery, equipment and knowhow to enter into commercial operations. Consequently, they look for large investors or the necessary financing units to launch their projects.


Many Latin American and some African countries have succeeded in supporting start-up funding by local banks, in cooperation with well-known financial institutions such as the International Finance Corporation. El Salvador, for example, has succeeded during the past two years in financing these small projects, especially those led by women, in addition to engaging in smart climate-friendly investments. These projects focused on three areas, including strengthening the productive sector, building sustainable cities and communities, and enhancing financial inclusion.


The banking policies have helped reduce barriers to accessing finance for these disadvantaged sectors, while experts believe that such partnerships, accompanied from the outset by key technical advice can lead to job creation and a better quality of life for people. Such partnerships, which are established in cooperation with some international financial institutions, are working to create a pilot effect by proving the feasibility of investing in emerging markets, especially since there is a need for this type of investment that enhances the economic opportunities and creates more job opportunities for citizens.


When the productive sector is strengthened, for example, it makes start-ups more solid and diversified in the production process, and provides more decent jobs, which helps people to develop their skills and generate daily income. In building sustainable cities and communities, it works to ensure that more people have access to decent housing, to help spread mobility solutions and to support the decarbonisation of highly polluting industries. With regard to promoting financial inclusion, this helps in facilitating access to banking products and services and providing financial education to contribute to the formalization of the economy.


International Finance Corporation sources indicate that only 40 per cent of micro, small and medium enterprises in El Salvador can obtain a bank loan or one credit line, while there is a possibility for women to access bank accounts for loans, where banks are working to increase their share in this type of financing. Financial support, especially for the productive sector, by more than 30 per cent to protect its owners, ensure their continuity of production, and preserve jobs in the country.


The challenges faced by small business owners are many, and the financial and banking support from local banks undoubtedly contributes to the economic revitalization of them and the local economy of their countries and provides more work for job seekers.


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