Feb. 15, 2016

HE Dr. Mohammad M. Al-Zuhair


HE Dr. Mohammad M. Al-Zuhair

Executive Chairman, Kuwait Nat. Fund for SME Dev.

"We are collecting data about SMEs and will eventually establish an information center."


Dr. Al-Zuhair is currently the Executive Chairman—Head of the Kuwait National Fund for Small and Medium Enterprise Development. During his tenure in Washington, DC, he worked with George Washington University, held positions as the Vice President for Private Equity at a DC-based boutique investment firm; and served as the Executive Director for Arab Countries at the World Bank. He holds both a PhD in Finance & International Business and an MBA in Finance and Investments from George Washington University, as well as a Bachelor of Science in Petroleum Engineering from the University of Tulsa.

What led to the establishment of the National Fund in Kuwait, and how important is it that Kuwait support SMEs at the national level?

There has been considerable talk globally about developing entrepreneurship and addressing the issue of how nations can give SMEs a central role in their economies. We see in advanced economies, as well as emerging markets, that SMEs make up between 70-90% of economic contribution and job creation. Thus, wealth and job creation typically come from SMEs. The question then becomes how can we best support SMEs and what areas do we focus on? We know for sure that SMEs must be part of the larger value-chain. In 2013, the Kuwaiti government passed a law attempting to address all the issues that SMEs face, beyond financing alone. Out of this legislation came the National Fund, where we are also responsible for developing entrepreneurship in Kuwait. In improving the local ecosystem for SMEs, we work closely with the Kuwait Direct Investment Promotion Authority (KDIPA) to enhance the business environment in Kuwait for companies, covering licenses, labor, minimum capital requirements, locations, and operations. One of the biggest challenges we face in our region, as do some Asian countries in their domestic market as well, is that failure is unacceptable. However, thinking outside the box and creating new and innovative business ideas that have the potential to succeed, inherently carries the risk of failure by definition. Changing the culture requires policymakers in government; leaders in the private sector; and entrepreneurs themselves to think differently. Banks, for example, are not willing to lend money to businesses with high risk. If financial institutions don't provide access to capital for SMEs, and governments are relegated to a purely regulatory role, then we have to recognize the incompatibility of our basic economic assumptions. This is where governments, represented by the National Fund in this case, come in. As a country and as a government, we now see the rewards and are willing to accommodate and manage the risks involved, supporting the incubation of both ideas and individuals.

What are the main barriers for SMEs in Kuwait?

We are collecting data about SMEs and will eventually establish an information center that will serve as the central point for all information related to SMEs. In the meantime, we undertook a survey as part of formulating our strategy and five-year plan where we worked with the World Bank, independent international experts, government institutions, and more than 70 entrepreneurs and stakeholders from Kuwait. Most participants highlighted that acquiring commercial licenses is the number-one obstacle, as well as acquiring the relevant permission to operate their businesses here. Therefore, we are reviewing all the legislation, regulations, and policies that govern the market to see which of them need to be revised. One of the positive outcomes was the reduction of the minimum capital requirements in April 2015. According to our survey, the second obstacle for SMEs is labor, while access to financing came in at number three.

What services does the National Fund provide to entrepreneurs in Kuwait?

Based on gaps we see in the market, we divide our services between financial and non-financial support. The financial support comes in the form of either debt or equity, ranging from seed capital to later-stage growth financing. Ideally we should not provide venture capital, but the private sector is not doing this, so we must address this gap. Debt support comes either directly from us or in collaboration with local banks. These conditions are different, however, because banks are traditionally hesitant to finance a company in its initial years of operation. Banks want financial evidence proving that a company has low risk. Seed capital comes in smaller amounts, so it is an easier form of finance. In terms of non-financial help, this ranges from someone coming to us without an idea to take general or specific training about how to develop an idea, to a more-advanced idea in a specific sector or industry that needs support to develop, test, pilot, and launch. Entrepreneurs have to look at the immediate GCC as their primary market, and then beyond that—regionally and globally—for their wider market. And with this comes the importance of greater competitiveness.

How does the National Fund collaborate with regional and international organizations?

We have already signed agreements with various countries that are well known for implementing successful policies and programs to develop SMEs. Our regional partner is the Khalifa Fund for Enterprise Development (KFED) in Abu Dhabi, which is leading efforts towards a possible federal law for the UAE, adopted from Kuwait's National Fund law in terms of the requirements and structure. We are also working with KFED at the institutional level. We are similar to the Emiratis in our culture and demographics, and we face many common issues in economic development. We have done the same at the global level with the Small and Medium Business Administration (SMBA) from South Korea. Part of that involves exchanging data, information, and learning at the institutional level as well as by individual entrepreneurs. This relationship is also about opening doors for businesses. The SMBA can help our businesses access South Korean markets, and vice-versa. At the invitation of the United Kingdom government, I gave a keynote speech in 4Q2015 at the Commonwealth Business Forum in Malta on entrepreneurship development, SME growth, common challenges, and the Kuwait experience. This forum included 73 countries. Regionally and internationally, other countries are recognizing what we are doing in Kuwait. They recognize that it is a tough job, but it has to be done, and they commend Kuwait for doing it.

What are your expectations for 2016?

Given that we are trying to change a culture and a mindset, we realize that in the first years as a Fund our key performance indicators should not depend solely on the number of projects we finance or the amount of capital invested. What is important for us at this stage is the number of people with whom we engage. This includes holding events that nurture the right attitudes. We will also utilize regional and international mentors to work with entrepreneurs and provide them with the right motivation and explore their skills. The second factor is training, both general and specialized. We started the Kauffman FastTrac Program in November 2015 and will continue to do this every two to three months. This, together with our other training programs, helps create a business pipeline for the future through the people we train and qualify. Participants come out of the process with a detailed business plan in hand. This is different from just a feasibility study. It is not only about making money; we need a business plan to show why there is an added-value proposition in our concept, and why we should all believe in it to achieve the objectives of our economic and human development.