Liquidity Support Fund: Who’s It Benefiting So Far?

2020-02-12 - 10:27 p

Bahrain Mirror (Exclusive): A Liquidity Support Fund was launched to provide financial facilitations to companies, amid questions about the beneficiary companies and demands for real market reforms and protection of Bahraini investors instead of flooding them with debts.

Finance Minister Salman bin Khalifa Al Khalifa announced on Wednesday (January 29, 2020) that banks contributing to the liquidity fund will start providing funding to the first batch of 30 companies, without disclosing their names.

According to the Minister, the fund so far has accepted financing 6 large companies and 24 medium and small ones, after sorting out requests "to ensure that they meet the specified eligibility criteria".

The idea of the project, which was established by four national banks under an official directive from the Crown Prince, is based on providing financial facilitations to companies at a low interest rate of 2.5%, offering up to a maximum of 1 million dinars to large companies and 250,000 dinars to small or medium-sized establishments.

The Fund did not announce the names of the beneficiary companies, perhaps in order to avoid damaging their financial reputation, but the project needs more transparency and consideration of the needs of smaller enterprises.

If the urgent demands of small firms, to make labor market reforms that would enable them to overcome difficulties, are ignored, then the criteria for entitlement to facilitations must be improved to achieve the greatest possible support in the face of market disruption.

This could be done through extending the facilitations to more than 3 years, as well as specifying the "quota" of the fund for those institutions, otherwise the largest share of the fund will go to major traders.

Small traders regret that they were not given the chance to be involved in the fund's formation consultations, despite the fact that the Bahrain Chamber of Commerce and Industry was represented in the consultations.

The consultations included the Ministers of Finance and Industry, the President of the Chamber and the CEOs of contributing banks, all of whom are owners of large companies.

According to official data, the number of applications submitted by large companies to take advantage of the credit facilitations provided by the Liquidity Fund at the end of the application period on Thursday (January 16, 2020), reached 176.  Meanwhile, the number of small company applications was not disclosed.

In order to maintain balance in the provision of credit facilitations to large companies and SMEs, the Fund must continue to provide facilitations for 4 establishments for each large company.

Small business owners questioned the extent to which this could be achieved as large companies sought credit facilitations, in addition to the non-involvement of direct representatives of small enterprises in consultations and the evaluation of applications.

The owner of a contracting company told Bahrain Mirror that he does not want to prejudge the fund's work, but said that there should be more transparency and verification of the process of applying the required standards.

"Providing facilitations to 24 institutions for every 6 large companies as a down payment is fair so far, if it continues in this path, the Fund could provide financial facilitations to a large number of institutions," he added.

"The question remains, do officials really believe in the role of small enterprises? If that is really the case, the solution would be to make real reforms to ensure a stimulating work environment, not lending more to floundering parties."

Arabic Version