Emirates Development Bank to boost lending to $1.36bn by end of 2022

Emirates Development Bank, the state-owned lender focused on financing companies in key industrial sectors, aims to boost its funding to Dh5 billion ($1.36bn) by the end of this year from about Dh2bn it has lent so far, chief executive Ahmed Al Naqbi said.

The Abu Dhabi-based lender plans to top the Dh5bn financing level next year and in 2024, as it presses forward towards its target of Dh30bn in total funding before the end of 2025, Mr Al Naqbi told The National on Tuesday.

“Since the relaunch of our strategy … we're right around the Dh2bn mark of financing of the approved loans that we have,” he said on the sidelines of Make it in the Emirates forum in Abu Dhabi.

“Now this year alone, we plan on approving a total of approximately Dh5bn [in funding]. We have about Dh3bn [more] to go before the year end … and that’s what we're going to be giving out.”

The lender aims to reach about 20 per cent of its overall funding target before the end of this year and Mr Al Naqbi expects EDB financing activity to pick up pace further in 2023 and in 2024.

“Next year, you can expect that there'll be a small increase. How much we expect we haven't decided … but we do expect a small increase for 2023 and then similarly in 2024,” he said.

The planned funding is purely from the bank’s own balance sheet. Lending support and credit guarantees it offers through commercial banking channels will be on top of that, he said.

EDB, which extends financing to large corporate clients, small and medium-sized enterprises and start-ups, has so far provided about Dh350 million through its credit guarantee programme, which was rolled out in partnership with nine commercial banks.

The 10th financial institution will soon be added to the list to help SMEs access finance and full banking services, Mr Al Naqbi said.

EDB, which launched its new strategy last year, funds companies in priority sectors, including health care, infrastructure, food security and technology.

It works with state entities including the Ministry of Industry and Technology and free zones such as Dubai Industrial City, Jabel Ali Free Zone and Khalifa Industrial Zone in Abu Dhabi to provide financing to their clients.

“All the money that we give out is very much targeted right at the industrial base of the country,” he said.

EDB, founded in 2011 through the merger of Emirates Industrial Bank and the Real Estate Bank, aims to generate 25,000 jobs in the next five years.

Last year , the UAE launched its industrial “Operation 300bn” strategy to position the Arab world’s second-largest economy as a global industrial hub by 2031. The 10-year plan focuses on increasing the industrial sector's contribution to the country's gross domestic product from Dh133bn in 2021 to Dh300bn in 2031.

The strategy focuses on boosting production in 11 priority sectors, supporting the growth of national industries, attracting foreign investment and ensuring availability of dedicated financing for local industrial companies.

EDB is at the heart of government push to provide funding to the industrial sector companies.

“We're aligned to the 2030 plan, in line with the project ‘300 billion’,” Mr Al Naqbi said.

It plans to allocate Dh7bn in financing to the manufacturing sector in the next five years. The advanced technology sector is expected to receive Dh5bn in funding, infrastructure Dh8bn, health care Dh2.5bn and the agricultural technology and food security sector companies are projected to receive another Dh2.5bn.

“These are the key sectors … where the country and the government [is] working to ensure self-reliance and sustainability in the long term,” Mr Al Naqbi said.

EDB, which earlier this month raised $750m through the sale of a five-year bond, does not plan to revisit the debt capital market in the medium term and will continue to diversify its funding sources.

It plans to tap deposits from government-related entities to access cheaper funds for lending, Mr Al Naqbi said.

“It served us really well, the bond issuances with our equity, but now that we are trying to set up a proper industrial development bank, we want to diversify our funding base to lower the cost of funds. The purpose is not to improve our margins, but to pass through the savings on to the SMEs and large corporates,” he said.

“What we're looking to do is to attract large GRE [government related entities] and government deposits," he said. These "rolling deposits" will help in creating an ecosystem where the bank can recycle deposits into some of its funding, allowing it to “cheaply” fund companies and projects.

The revamped strategy has helped EDB in adding Dh1.91bn to the national economy and supported the growth of more than 1,350 SMEs until the end of the first quarter of this year. EDB’s digital banking platform, which allows SMEs to open accounts and approves credit facilities within days, is currently serving close to 1,500 accounts.

“We're growing quite fast,” he said. “We expect to end the year [with] well over 2,000 [companies]."