BEIRUT: The state-run Kafalat Corp., which provides subsidized loans to small and medium enterprises through Lebanese banks, is expected to see a slight drop in its profits at the end of the year due to fall in the value and volume of loans, its president said Thursday.
“Our profits this year are expected to fall to $6 million or $7 million from the $9.5 million we made in 2012. Nevertheless we are going to make a profit despite the fall in loans to the clients,” Khattar Bou Habib told The Daily Star.
Bou Habib said the value of soft loans applications had started dropping in the first half of 2012 and had continued up till now.
“I think some of the clients who want to obtain a loan from the bank through the Kafalat program have preferred to postpone this request due to the situation in Lebanon and the region,” he said. “Some of these applicants have apparently decided to wait for the situation to improve before making any commitment.”
He added that once the situation in Lebanon improved then the performance of Kafalat would follow suit.
Figures released by the Kafalat Corp. show that loans extended to small- and medium-size companies under the company’s guarantee reached $87 million in the first nine months of 2013, down 20.1 percent from $108.9 million in the same period last year.
Bou Habib said some banks may have also decided to be more patient in processing the loan requests to reduce the prospects of default.
“The tourism sector was hit very hard this year and this had an effect on those who wanted to obtain loans for opening a restaurant or a business related to tourism,” Bou Habib said.
The default in 2012 stood at 2.1 percent, a figure expected to rise only to 3.5 percent, he added.
Kafalat said the number of loan guarantees totaled 641 through September compared to 801 in the same period last year.
The average loan size reached $135,663 compared to $135,936 in the first nine months of 2012.
Mount Lebanon accounted for 39.8 percent of guarantees, followed by the Bekaa Valley with 21.5 percent, the south with 12.8 percent, the north with 11.1 percent, Nabatieh with 8 percent, and Beirut with 6.9 percent.
The agricultural sector accounted for 40.6 percent of total guarantees, followed by industry with 35 percent, tourism with 17 percent, handicraft with 4.8 percent, and specialized technologies with 2.6 percent.
Kafalat is a state-sponsored organization that provides financial guarantees for loans up to $400,000 earmarked for the setup and expansion of SMEs in productive sectors.
It guarantees up to 75 percent of the loan amount and a similar percentage of the interest that accrues during the grace period.