In a move to encourage further investment opportunities in its private wealth, Qatar is gearing up to introduce a new regulatory framework to welcome non-bank financial companies (NBFCs). The introduction of such a regime should spur growth and incentivize such entities to extend retail lending services to small and medium enterprises.

The Qatar Central Bank had already drafted regulations in 2014 which aimed to extend the lending activity in the market by reducing the limitations on credit facilities being imposed on NBFCs, enabling NBFCs to extend larger loans to their clients and to open the market to smaller businesses. However, a report prepared through a joint initiative of the Qatar Financial Center, Thomson Reuters and the Islamic Research and Training Institute found that the NBFCs present in Qatar are now presented with strong opportunities for growth, especially in relation to the financial sector targeting small and medium enterprises. At the same time, the report identifies that a strong and stable comprehensive plan must first be in place to ensure the success of these NBFCs. The report noted that Indonesia’s non-bank financial sector is one of the most developed in the world, with a framework that concentrates on regulatory reporting, disclosures, Shariah governance and investor protection.

Given Qatar’s introduction of initiatives to grow the SME sector, it should look to the successful strategies employed by Indonesia and others to create a regulatory framework that is designed to cater to NBFC lending to SMEs instead of focusing on larger institutional lending to large corporations. Such a framework also will further support the more proactive approach from lending institutions toward SMEs adopted in recent years, including the establishment of a loan guarantee scheme from Qatar Development Bank to allow SMEs to tap opportunities for growth.