A recent World Bank study has found that the share of loans given to SMEs in the MENA region was the lowest in the world, at an average 7.6% of total bank loans. This is the gap that Beehive aims to fill by providing SMEs with faster access to lower cost finance.
After 33 years in commercial banking Rick Pudner, the former CEO of Emirates NBD, has moved into P2P lending. He is the chairman of the nearly launched Beehive. He commented:
“I’m very excited to be part of Beehive and as an alternative finance platform I think it will bring significant benefits to SMEs, investors and the region itself. Presently, a major stumbling block for businesses with growth aspirations is gaining access to credit, as banks generally reject between 50-70% of SME loan applications. SMEs represent 90% of total businesses in the UAE but account for just 4% of bank loans. Through Beehive, we have created an innovative online platform that directly connects investors and creditworthy businesses creating mutually beneficial partnerships for growth.”
The platform allows companies to borrow between AED 100,000 and AED 500,000. Individual investors can invest as little as AED 100. They bid to lend money, choosing how much they will lend and the interest rate. Beehive then charges a small percentage fee of the loan amount as they facilitate the loan agreement between the business and investors. Typically, the business receives funding in about 7 days and investors receive monthly repayments at target rates of between 8% and 12%.
Craig Moore, founder and CEO of Beehive has said:
“Transparency is key to our offering. At Beehive, we are giving individual investors the opportunity to directly support regional SMEs, driving economic growth and employment. We are confident we have created a platform that offers a real alternative to the traditional debt markets and better value to both sides of the lending transaction.”
The International Finance Corporation (IFC) estimates that the current SME funding gap in MENA is about $260 billion. Beehive hopes to help fill part of this gap as it aims to support the growth and development of the 300,000 plus SME businesses in the UAE.
Moore has added:
“The UAE has the potential to benefit enormously from this asset class where businesses have faster access to lower cost finance and smarter investors earn higher returns on their money, all in a tried and tested concept used around the world. We are extremely excited to be the pioneers in the UAE and are delighted to be rolling out a competitive and technologically advanced lending platform to this market.”
At the end of 2013 Liwwa, the first Middle Eastern platform was launched. It uses a slightly different model to Western platforms due to the restrictions that Sharia law place on earning interest. However, they have a “profit rate” on the site and Liwwa borrowers must specify the purpose of the loan they require.
The Middle East has one of the highest savings rates in the world and many small businesses that are in need of capital. There is a big opportunity here for peer-to-peer lending and we will be watching closely to see how Beehive fulfils its aims to mitigate this funding gap.
