Small and Medium-Sized Enterprises (SMEs) make up 96% of businesses1 registered in the MENA Region, making them key drivers of the economy and employment.
But contrary to the fact, these businesses have historically struggled to procure funds to expand and grow. In fact, SMEs only possess a 7% share of the total lending in MENA countries, the lowest in the world.
This gap has resulted from long-standing roadblocks like lack of collateral, asymmetric information, and weak creditor rights.
However, with the regulatory climate relaxing in the Middle East, SMEs might have a better chance of procuring funding and pooling capital into mission-critical business areas.
That said, the focus now shifts to MENA banks and their readiness to service this vast SME market. SMEs in the Middle East are serviced by only a handful of banks, most of which are still branch-driven entities.
This traditional approach might not work with the evolved sensibilities and expectations of today’s businesses. And this could be the chance for MENA banks to drive digital transformation in core banking, position themselves better to support the SME economy and provide better services. In order to capture this opportunity, FIs need to overcome their data and operational challenges, widen and tailor the range of instruments to finance SMEs in order to address their diverse needs at various stages of their business.
Digitise onboarding & loan disbursal
- Digital onboarding, made possible by the evolved core banking solutions of today, banks can help traditionally underserved SMEs manage their money better by offering streamlined, fast, and hassle-free onboarding. This allows for swift remote banking, which has become a norm in the post-pandemic era. It’s now possible for banks to carry out onboarding through Video KYC and online processes and still be compliant with financial regulations.
- The advent of generative AI has opened up many opportunities for banks to automate Loan Disbursement processes. By integrating tools like ChatGPT into core banking, financial institutions can:
- Automate Document Processing: AI can quickly analyse and process loan applications, financial statements, and other relevant documents, reducing manual data entry and the potential for errors.
- Improve Risk Assessment: AI algorithms can assess credit risk more accurately by analysing vast amounts of data, including non-traditional data sources, leading to quicker loan approval decisions.
- Drive Predictive Analytics: AI can predict potential defaults or financial distress, allowing banks to make more informed lending decisions swiftly.
- Automate Customer Service: AI chatbots can handle customer inquiries regarding loan applications, providing immediate responses and guidance, thus reducing processing time.
Transition to a Composable Banking Architecture to launch niche offerings
Composable core banking architecture can enable banks in Middle East to swiftly launch specialized SME products on the go. This modular approach allows for the seamless integration of different financial services and technologies. Banks can quickly assemble and reconfigure various components, such as risk assessment tools or payment systems, tailored to specific SME needs.
This flexibility leads to rapid development and deployment of niche products, catering efficiently to the diverse requirements of SME sectors like agriculture and IT. Composable architecture thus fosters innovation, agility, and a quicker response to market demands, significantly enhancing banks’ ability to support SMEs with customized financial solutions.
In a Nutshell
Banks that opt for a digital core banking strategy can give SMEs the freedom to request finance, renew accounts online, expand their credit line, and get reminders for banking, regulation, or compliance-related activities. Additionally, banks can improve risk and fraud capabilities to provide faster onboarding, verification and credit checks. It’s a win-win situation for all parties involved.
However, the road to digital core banking is not without challenges. Wound up in their legacy architectures, many banks in the MENA region haven’t been able to make the shift and adopt core banking solutions yet.
iGCB’s Digital Core can provide slow-to-move banks with the capabilities to serve an evolved SME Market. With our AI-enabled, microservices-based, cloud-native, and API-active platform, you can scale on demand, add new functionalities, drive contextual customer experiences, and leverage rule-based engines for credit and pricing.
Moreover, you can also partner with third-party providers and fintechs to improve your onboarding capabilities and provide seamless account management for businesses.
Embrace digital transformation with Digital Core today. Start your journey here.