HSBC has earmarked Dh1 billion (US$272.2 million) for loans to local small businesses in the year ahead, as the bank attempts to counteract a slowdown in its lending elsewhere in the region.
The banking giant, based in London, launched the fund targeting small to medium-sized businesses with international trade links. The fund will be 30 per cent allocated to Emirati-owned businesses.
The move followed Government efforts to increase available financing to small businesses, said Abdulfattah Sharaf, the chief executive of the bank's UAE operations.
"HSBC is a trade bank and we believe it's through leveraging this strength through our heritage, global reach and expertise that we can continue to benefit our customers," he said.
Small businesses account for about 90 to 95 per cent of the UAE economy, according to HSBC.
The increased funds come after HSBC's lending to customers in the Middle East shrank in the first quarter of the year to $27.3bn, a 0.8 per cent dip during the quarter.
But lending to small UAE businesses was one area where the bank was still registering significant growth, said Nick Levitt, the bank's head of commercial lending.
The bank's lending to small-and-medium enterprises in the UAE totalled about $600m at the end of last year, having grown at a rate of slightly less than 20 per cent during the year, Mr Levitt said.
The bank aims for the same growth rate this year.
HSBC has launched two funds since 2010, each worth $100m. Both have now been fully allocated.
Bank executives in the UAE have complained that the Emirates' debt laws, which criminalise bounced cheques and make it difficult to repossess assets in the event of a default, limit the amount they are willing to lend to small businesses.
New bankruptcy laws designed to bring the UAE in line with international practices are expected to be passed by the end of this year.
Asked whether the legislation would convince banks to lend more to the economy, Mr Levitt said: "Ultimately, yes."
Bank lending in the UAE ground to a halt during the first quarter of the year, with data from the Central Bank showing net loans and advances across the sector grew by a marginal 0.28 per cent during the first three months of the year to Dh1.07 trillion.
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