SME accelerator initiative to support Bahrain’s diversification strategy
Bahrain has moved to improve its start-up ecosystem as part of plans to further diversify the economy, launching a new funding and training initiative specifically targeting entrepreneurs and small and medium-sized enterprises (SMEs).
In early March Tamkeen, the national labour fund, launched the Flat6Labs Bahrain accelerator programme in partnership with Egypt-based, regional start-up facilitator Flat6Labs.
Over the next three years at least 40 local and international start-ups will each receive seed funding of $30,000 under the initiative, and will take part in a 16-week mentorship programme designed to develop entrepreneurial skills and create opportunities for investment and networking.
The accelerator will focus on start-ups operating in selected industries, including financial services, education, ICT, mobile apps, health care and tourism, among others.
The announcement was made during StartUp Bahrain Week, a gathering of some 2500 entrepreneurs and business figures from around the world that saw $100,000 in funding distributed to local start-ups.
Cultivation of entrepreneurship central to SME growth
The programme represents the latest effort by Tamkeen to support growth among SMEs. Since it was established in 2006, the fund has provided support and skills training to more than 140,000 individuals and businesses, with 60% of assisted businesses being start-ups.
On top of training and incubation initiatives, Tamkeen has helped SMEs build connections with the private sector. In 2016 it collaborated with the Bahrain Economic Development Board (EDB), technology investment firm C5 and Amazon Web Services to develop the Cloud 10 accelerator programme to assist tech start-ups by using cloud services.
The initiative, which aims to train 300 small businesses by 2020, offers participants an intensive, three-month mentoring programme, providing both technical training and exposure to potential investors.
Such efforts have improved Bahrain’s position in the Global Entrepreneurship and Development Institute’s Global Entrepreneurship Index 2018. The kingdom was ranked 35th out of 137 countries, below the UAE (26th) but above Kuwait (39th) and Saudi Arabia (45th).
“Entrepreneurship has a major role to play in accelerating diversification, encouraging growth and creating valuable jobs,” Khalid Al Rumaihi, chief executive of the EDB said during StartUp Bahrain Week. “Bahrain has strong fundamentals already in place and, as a result, the number of start-ups in the kingdom has grown 46% over the past three years.”
The SME ecosystem is set to be further strengthened in 2018, with Zayed bin Rashid Alzayani, the minister of industry, commerce and tourism, announcing in January that a national plan for small businesses would be implemented by mid-year.
The plan includes legislative reforms relating to insolvency and bankruptcy, along with measures to improve export potential and competitiveness of small players.
Access to finance key for growth
Despite the progress made in facilitating SME growth in recent years, many businesses continue to face challenges associated with access to credit.
According to Oxford Business Group’s Business Barometer: Bahrain CEO Survey, released in March, nearly 30% of executives surveyed described access to credit as difficult or very difficult.
A 2016 study undertaken by the Bahrain Chamber of Commerce and Industry similarly found a lack of finance to be one of the main factors hindering SME development, while the World Bank’s latest “Doing Business” report cited credit access as a key issue affecting private sector growth. Although Bahrain ranked 66th out of 190 countries in the 2018 ease of doing business index, it ranked 105th in getting credit.
While these challenges continue to affect the sector, institutions in the kingdom have implemented a series of initiatives to attempt to improve the situation.
In March last year the Bahrain Bourse established the Bahrain Investment Market (BIM), a platform focusing on SMEs. To attract growing companies, the BIM has more relaxed listing requirements, including lower minimum capital limits and fees. Businesses looking to list on the platform also only need a minimum of three shareholders, compared to 100 on the main exchange.
Furthermore, the Bahrain Development Bank, which includes in its charter a commitment to supporting small enterprises, collaborates with Tamkeen to provide loan assistance on interest payments taken out by SMEs, while a new $100m venture capital fund of funds is expected to be launched in the first half of this year, targeting private investors support for entrepreneurs and tech-based start-ups.
While efforts are being made to encourage banks to lend to SMEs, some industry figures say the issuance of sovereign bonds could be another avenue to pursue.
“This liquidity could also be deployed to the financing of large projects or some specific segments such as SMEs. Banks should be encouraged to increase lending in areas that boost the local economy and strengthen infrastructure, so that they have a balanced strategy that is not excessively risk averse,” Jean-Christophe Durand, CEO of the National Bank of Bahrain, told OBG in a recent interview.