Banks embracingrole in diversification

BANKS are not shirking from their role in Brunei's efforts to reduce dependence on the oil and gas sector.

In the Oxford Business Group's The Report 2009, Javed Ahmad, acting managing director of Bank Islam Brunei Darussalam (BIBD), said that banks will have to invest in local businesses if Brunei is to move away from oil and gas exports to develop a robust economy while maintaining sustainable growth.

"The primary driver of the local economy is oil and gas exports. The problem is that we import nearly all other goods so very little added value is retained in the economy," he said.

"Banks must move away from purely being providers of debt and become more active in local business development. We should provide local firms with a financial framework and assist them in making decisions in the early stages of their development," he added.

Javed explained that this will therefore allow entrepreneurs to grow their businesses and contribute to the economy, keeping the funds within the country.

Pierre Imhof, Baiduri Bank general manager, in the same publication, said the diversification and expansion of the domestic economy will offer more opportunities for banks to develop their business in the corporate sector.

The challenge however will be that the financing requirements of diversification projects may be much higher than what one single bank can support, he said.

"(These banks) will have to share business through syndication, rather than competing, in order to keep the maximum benefit of a project within the country," he said.

Imhof explained that it is important to keep a climate of fair competition between all the banks, regardless of them being local or foreign, Islamic or conventional.

"It is important to ensure that we are not in an overly competitive environment that will weaken the banks, rather, the banks should work together to help realise the government's diversification ambitions," he said.

BIBD, in partnership with the government is expected to launch the Export Refinancing Scheme sometime this month.

The scheme which will be 75 per cent owned by the government and 25 per cent by the BIBD is expected to set its loan ceiling at $500,000 and will be introduced to help facilitate the development of local businesses with products and services that have export potential.

According to an earlier news report, a total of $52 million in loans have been provided to SMEs over the time span of 1999 to 2009.

The Enterprise Facilitation Scheme, loans with a ceiling of $5 million, has provided loans totalling $42 million to 122 SMEs from 1999 to 2009, while the Microcredit Financing Scheme, loans with a ceiling of $50,000, has provided $10 million worth of capital to 485 SMEs from 2001 to 2009. The Brunei Times