Bahrain: Around 200 small businesses are facing major financial difficulties that could force them to close down and let go of thousands of employees.
Small and Medium Enterprises (SMEs), which have been struggling to stay afloat since last year, have called for urgent measures to be taken, including new legislation, to protect them from going bankrupt.
The SMEs Development Society, which has been approached by the businessmen, has already held meetings with officials from the Industry, Commerce and Tourism Ministry and Bahrain Chamber of Commerce and Industry (BCCI) to find solutions.
“There are around 200 businesses such as small construction firms, consultancies, printing and advertising companies that are facing a tough time to sustain their operations because of the market challenges,” said society chairman Ahmad Subah Al Saloom.
“These were the same SMEs which were in 2012 given funds [of up to BD10,000] by authorities to restructure and get back to business and four years down the line they are back again asking for more money because they are facing financial difficulties.
“We need to find a way to support them and if they want financial assistance then it should be granted after thorough examination of their conditions that includes studying their audit reports for the past four years.”
Mr Saloom, who is also BCCI’s SME committee deputy chairman, told the GDN yesterday that if solutions were not found then the companies would be forced to start axing over 2,000 staff members, including Bahrainis, who are employed in the sector.
“Several Bahraini families will be affected at a time when the global markets are slow,” he added.
Mr Saloom also proposed drawing up new legislation to safeguard SMEs similar to Chapter 11 of the US bankruptcy code, which protects a company from creditors and allows time for reorganisation.
“The society has submitted its suggestion to the ministry to work on a new law similar to Chapter 11 to help companies facing financial problems by allowing them time to restructure their line of businesses and guarantee the rights of all the creditors and individuals,” he explained.
“We could be the first country in the region to introduce an advanced law that would protect rights of companies and banks in Bahrain.
“Under the proposed law, businesses in Bahrain will be given a grace period to pay back their debts, to pay only principal interest amount on their loans, and to be exempt from government fees until they are able to continue their business normally.”
Review
“We can review the US model and customise it according to our market needs that could involve insurance firms stepping in to protect the companies facing trouble or on the verge of bankruptcy.”
He said he hoped authorities would urgently review the proposed law and allow it to be enforced as a trial run covering the 200 SMEs.
“Some of these businesses are at wrong locations or selling products that are old and do not meet the market requirements, which are changing rapidly with technology,” he added.
“These businessmen need to switch to other products to sustain their operations.”
Society vice-chairman Khalaf Hujair said they were doing their “level best” to help the businesses by mediating with the government and private bodies.
“The society aims to support Bahrain’s economy and help in creating better business environment that ensures economic prosperity and stability according to Bahrain’s 2030 vision,” he said.
“Some companies need counselling to improve their business, others need restructuring or even changing their type of business.
“We need a transparent and appropriate procedure for giving financial support to those companies”.
The GDN reported in April that BCCI and Tamkeen proposed a BD10 million fund to revive more than 100 failed SMEs and also to train their owners to prevent such failures in the future.
The SMEs contribution to Bahrain’s Gross Domestic Product is estimated to be around 28 per cent, forecast to reach 35pc in the next two years.
sandy@gdn.com.bh
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