Kuwait may revise soft loan terms for SMEs

Last month, Kuwait announced measures aimed at shoring up its economy against the coronavirus pandemic, including soft long-term loans from local banks, and the central bank asked banks to ease loan repayments for companies affected.

Banks have recently opened discussion with the Central Bank of Kuwait, pushing for a review of funding controls for entrepreneurs, small and medium enterprises SMEs and affected economic entities, well-informed sources said.

The COVID-19 situation prompted urgent need to ease the terms of soft loans, with the local banks showing willingness to fully finance the programme, without requiring the partnership of the National Fund for Small and Medium Enterprises Development.

Sources said banks demanded a government guarantee of 80 to 90 per cent of the total portfolio of these funds.

The Kuwaiti banks have allocated KD 2 billion ($ 6.5 billion) to the soft loan portfolio expected to be granted to small and medium enterprises, as well as companies and clients affected by the consequences of the coronavirus.

The SME loans will hold between 15 and 20 per cent of the total two billion dinars, while the rest of the sum will be directed to financing companies and clients affected by consequences of coronavirus.

The SMEs can get soft loans from local banks and the National Fund for a period of two to 3 years, including a grace period of one year, provided that the interest rate does not exceed 2.5 per cent annually.

Some 150 entrepreneurs applied for soft loans, the majority of which are concentrated in three banks, although the data indicate that there are about 37,000 SMEs licensed locally.

Kuwait’s general budget will bear interest for the first two years, then share it equally with the clients is in the third.

The National Fund will accept the responsibility of managing the debt and the credit risks of the financing provided by it, and verify the customer’s use of the financing in the specific aspects.