October 29, 2007
Labour Fund and Shamil Bank Nibrass Financing SME Base

Running into the second month of the pilot phase, the launch of ‘Nibrass’ Small and Medium Enterprises (SMEs) Financing Scheme by Labour Fund and Shamil Bank has been met with initial successes and continues to be offered to a larger SME base in the Kingdom of Bahrain.

According to Mr. Farooq Mohamed Al-Awadhi, Senior Manager (Head of Corporate Banking), Shamil Bank, “The public response to the initial low-key launch of Nibrass was expected to fetch a lower number of applicants. The objective of inviting fewer applications in the pilot phase was to put to test the newly developed applicants eligibility criteria and to ensure that the Bank’s first such endeavor had all operational support systems in place. On the contrary, we received a large number of queries and walk-in customers which is a very encouraging trend. A total of 195 applications forms were collected by the SMEs from our offices, out of which 43 have been completed and submitted back to us. So far a total of 16 applications have been approved, 8 did not meet the eligibility criteria and 19 applications are in-process pending completion of some support documents. The in-process applications are initially within the eligibility criteria of the scheme and expected to be finalized soon. I am confident that a full-fledged communication program will convey the benefits of Nibrass to many more SMEs who would also like to benefit from this unique offer.”

The Labour Fund and Shamil Bank of Bahrain jointly launched Nibrass in last August - an enticing financing scheme, targeting Small and Medium Enterprises at a record low profit rate of 4 % per annum (on reducing balance). The Nibrass financing scheme includes packages ranging between BD10,000 and BD50,000 and will be increased to BD 100,000, following the completion of the pilot phase. The financing is accessible to SMEs on a first come first serve basis. The pilot phase of the scheme was to serve a batch of maximum 50 applicants who meet the eligibility criteria.

Nibrass, designed to improve SME’s access to low profit rate financings is already bringing about innovation and creativity and resulting in more and more Bahrainis being employed by the applicants in an effort to meet the financing eligibility criteria which has two dimensions, Bahrainisation level as well as percent of Bahraini ownership of the SME. A Bahrainisation level of 20% (or 10% for the constructions companies) must be satisfied when the Bahraini ownership for the enterprise is more than 50%. On the other hand, for enterprises in which Bahraini ownership is less than 50%, a minimum of 50% Bahrainisation level must be met.

SMEs, who have already received financing, expressed as to how Nibrass has encouraged them to embark on business ventures and play a greater role in economic development in the Kingdom: Khalid Ali is a local businessman who runs an ice cream business. He sells his product, brand named MiniMelts in Bahrain, Qatar and the Eastern Province of Saudi Arabia. Khalid Ali recently acquired the franchise of a brand called Australian Chocolate and needed the money to pay for the franchise fee and finance the business operations. Speaking of Nibrass, he said “I would call it an excellent scheme as it offers financing at extremely affordable profit rates. The repayment terms are also easy and a great assistance to small businessmen like me. SME financing offered by other banks in Bahrain are at much higher cost and come nowhere near this SME friendly scheme.”

Similar comments were made by Essa Mohamed, another Bahraini businessman who manufactures disposable plastic food packaging materials. His objective of acquiring SME financing is business expansion through a horizontal integration whereby he will diversify, in addition to plastic extrusion, into manufacturing aluminum food packaging materials. Essa is delighted to have received the SME financing and said “The financing will help me in buying machinery for the new business unit and better manage the liquidity. I intend to seek more Nibrass financing from Shamil Bank in order to increase production and be able to export my products to the international markets.”

Shamil Bank, a member of the Ithmaar banking group, is providing Sharia-compliant financing to applicants who meet the eligibility criteria set by the Labour Fund and Shamil Bank of Bahrain.

In total BD12.5 million will be made available over the two-year life cycle of the initiative. This vital step comes as part of the Labour Fund’s ongoing efforts towards a labour market reform, which is an essential step towards improving the performance of businesses. The financings are being offered at a discounted rate by Shamil Bank and further subsidized by the Labour Fund, with recipients being given a generous tenor of up to 10-years to repay them.

“This financing scheme will help SMEs enhance their productivity, allowing them to grow faster, while at the same time providing job opportunities to Bahrainis. These are by far the lowest profit rates ever made available to SMEs by any bank or developmental organization in the Kingdom. This remarkable opportunity must be fully capitalized by businesses and we are grateful that it was made possible through the cooperation of one of Bahrain’s leading financial institutions,” said the Labour Fund’s Acting Vice President for the Private Sector Support Mohammed Bucheery.

“Making SMEs self-reliant and able to attract high quality labour is an important part of the Labour Fund’s ongoing strategy to reinvigorate Bahrain’s labour market. Their prosperity is directly linked to economic growth and job creation. At the same time, we are working to make Bahrainis the employees of choice, through offering value-added training in order to create local competencies and skills in preparation for the new job opportunities that are envisaged,” he added.

Eligible SMEs must show strong potential and be at least one year old. They will need to submit their audited accounts to the bank and business plans may also be required for financings above BD50,000. Applicants must have good credit histories. The Bank is offering a streamlined application system, which allows eligible requests to be quickly and efficiently processed. SMEs can apply at Shamil Bank’s main office on the 9th floor of Seef Tower or at any of its branches located throughout the Kingdom of Bahrain. More information can be obtained from the Bank’s Call Centre during working hours by dialing 17878777.