Could you provide us with a brief introduction to the SME Fund?
The SME Fund was enacted by law in 2014, yet it was not the first time the Government was trying to support small and medium enterprises. Since 1997 and1998 there were many attempts to support in terms of financing, but it was not user friendly. This is why people complained that they did not have the chance to access adequate finance, they were being asked for financial history and collateral and this made things more difficult.
Then came the Fund. This put everything that had to do with SMEs under one umbrella, and I was then appointed to lead it.
We are not only a fund but also the SME agency of the country. The capital allocated is 2bn KD, making it the biggest SME fund in the world. The challenges –in general- start as we developed the strategy during the past months.
Our main objective is to develop companies, and at the same time make a profit. We will not be charging the standard interest even though we are taking the risk of the projects we are financing.
Awareness and education are very important. We are trying to change the culture of how you see small and medium enterprises and the difference between a small business and a startup.
If we are talking about the sector growing and leading to a re-shift of the national economy through startups and more entrepreneurship, then we have to focus on the youth –which already is 25% of the population- and for that we need to change the culture. We do have it in our first years of operations will involve education and incubation.
In the region, we are not very willing to take risk and the reaction to failure is often hiding it. You don’t even venture out into risky ideas. If we only stick with traditional models of small businesses then there is no real growth and hence no jobs.
We aim also at providing the right incubation to entrepreneurs. Incubators are normally placed in Universities, when innovation is booming and students have less of a hassle towards other aspects of life. A lot of people talk about SMEs, incubators. In reality, they are just referring to working space, and this is not enough. There needs to be a handholding to develop ideas, more mentoring to make this happen.
Locally we do not have the huge capacity for it, but there are people like Omar Al Ghanim one can rely on.
Startups first need to prove their idea right, getting into the incubation process and making sure it can be commercialized. Some ideas simply have no market for it. At this stage most of the cost will be absorbed by the fund, as an investment in people.
During incubation we aim at individuals meeting each other and putting their complementary skills to use. As a Fund we will be investing in groups rather than individuals. A lot of people think they can do it alone, but soon they realize they can’t because their limitation in terms of skills stops them.
The other issue we have is that a lot of people worry that if they brainstorm with someone their ideas will be stolen and the other person will become a competitor. That is part of the cultural change we are facing.
One of our objectives is that from day one we should be thinking of companies to become competitive enough to go beyond Kuwait. If we establish a company thinking Kuwait is the only target market then we are going to see limited growth in the horizon. Then it becomes difficult to change the business model and adapt. The Gulf and MENA region is key for this.
Being competitive and bringing the right people as partners is a key aspect.
How would you define your collaboration with the private sector?
We will be working with the private sector in a very active way. I have no intention of turning the fund into a thousand-employee institution, which makes it very bureaucratic. We need to help to create jobs in the private sector.
What would you say are the key areas that need more SMEs?
If you go to the Ministry of Commerce and look at all the grants they have issued to businesses you will see than 50% of licenses are for SMEs. However they are not the type of SMEs we are talking about, as they are considered as such only because of their size.
We admit as government that the demographics of Kuwait are not ideally the best. We have huge numbers of marginal labors that put extra pressure on the infrastructure of the country.
We are looking at creating jobs for Kuwaitis. It could be a business that brings in technology, and should it be labor intensive then it is important that there should be jobs that Kuwaitis like doing or are able to. We have to admit this issue, in which citizens of a country don’t do all the jobs.
As a country, one of my mandates is to create a center for information regarding SMEs. This makes ICT an obvious choice to develop as a sector. Another one is Media & Creative Design. We have many marketing graduates as well as architects and we want to tap on to their minds. Historically, those people do not go and work for government.
Light manufacturing is also important. While there is no real plan to become an industrial country but light manufacturing can be done locally. Traditionally SMEs are part of a large value change. We would be focusing on the petrochemical sector. Beyond this we would be working with the entities we are in contact with in the Government to see if there are plans to focus on some areas in particular. This is why I also work with KDIPA.
In regards to business in Kuwait, there are many large groups. How can SMEs complement them?
There is a perception that merchant families exist but not allow other businesses to group. This is not 100% true. People like Omar Al Ghanim are very interested in developing SMEs in the country.
Some countries started with conglomerates and these fuelled the formation of SMEs. In other cases, SMEs drive the economy and provide services and products to larger companies. We already have large companies in Kuwait so it is normal to aim at developing smaller ones.
What would you say is the most important thing to learn from other countries’ experiences?
Dealing with SMEs is always a challenge. Managing a small business is often harder than a larger one. There is no one model that can be applied in Kuwait but we are at the same time travelling to see different models and to adapt them to our reality.
Within the Gulf we have unique challenges. In other jurisdictions most of the workers are locals, here that is not the case. This is why we try to avoid some sectors.
We face the challenge of making it interesting for people to get into the startup space, willing to take risk and doing something good. If it’s not about brining food to the table, how do you make it attractive? In Kuwait owning a business is about lifestyle. For some people it is additional income, but for others it is just lifestyle. We are trying to approach it from this perspective and then move on to show success stories so more can be convinced.
The key is to convince the youth, to catch them early enough and prompt a positive change.