Entrepreneurial Arabs will make it better for the next generation

The first few days of November have quickly become known as Entrepreneurship Week in Dubai. The Dubai School of Government kicked off the week with a panel on women's entrepreneurship in the Gulf, featuring leading businesswomen from Abu Dhabi, Dubai and the region. The next day at the Young Arab Leaders Entrepreneurship Summit, cross-generational leadership was represented, with Sheikh Mohammed bin Rashid, the Prime Minister and Ruler of Dubai, and his son Crown Prince Sheikh Hamdan attending.

The youth summit, which I was involved in organising, was a Who's Who of Arab business leaders, including Rabea Ataya, the founder of Bayt.com. Habib Hadad, the founder of Yamli.com, Ihsan Jawad, the founder of Zawya.com, Dr Naif al Mutawa, the creator of The 99 comics, and Sheikh Khaled bin Zayed, the founder of the Bin Zayed Group.

The list of Emirati and regional guiding lights in entrepreneurship goes on and on. But perhaps the most important element among the 500 or so attendees were the scores of students and aspiring entrepreneurs who were there to learn from those who had gone before.

The week was capped with what will be viewed as a day of historic transformation in the world of Arab entrepreneurship. Led by Arif Naqvi, the chief executive of Abraaj Capital, and Fadi Ghandour, the chief executive of Aramex, more than 2,000 budding and established entrepreneurs congregated for the Celebration of Entrepreneurship 2010. At the event, Wamda.com, which means spark in Arabic, was launched as a meeting place for the region's entrepreneurs. (watch video: Impressions of CoE which ends with my quote)

The truth is that Arabs are sick and tired of hearing of the trouble that regional governments' failed policies have got us into. Arabs are now ready to do something about it. According to UNDP estimates, 50 million jobs (some say 100 million) need to be created in the Middle East by 2020 just to prevent unemployment from growing even worse. Harbour no allusions that Arab governments will be able to create these tens of millions of jobs: only the private sector and entrepreneurship have the potential.

Everyone was there for one common goal: instilling the spirit of entrepreneurship in young Arabs. The same podiums were shared by the likes of Naguib Swairis, the founder of Orascom Telecoms, and a pair of brilliant teenage Yemeni students who have started a new coffee-producing business. Their plans are no less grand than ridding their country of the menace of qat and bringing back coffee as an agricultural earner of foreign exchange.

Indeed, we are desperate for grand ideas. We need ideas that will allow the Arab world to make a giant leap into the present, rather than linger in the era of bygone policies.

A consensus was reached at the conference: the fragmented approach that Arab governments have taken will not work. It is simply not good enough for one country to create jobs while others lag behind. When Europe rose out of the ashes of the Second World War, it was not because Germany or France competed or worked in isolation; it was largely because of their joint effort to establish the European Coal and Steel Community, the precursor to the European Union.

Arab governments need to understand that without pan-Arab initiatives, true economic prosperity will not be achieved. We must capitalise on our demographic strengths as a region with a population larger than the United States and comparable to the European Union.

It is no coincidence that Maktoob.com, recently sold to Yahoo! for more than $100 million (Dh367 million), garnered so much global attention. After all, it was always a pan-Arab, not just a Jordanian firm.

The Celebration of Entrepreneurship 2010 featured ministers such as Sheikha Lubna Al Qasimi and Reem al Hashimi, entrepreneurial legends including Samih Touqan and Fadi Ghandour, and ambitious young people all voicing their concerns and sharing their aspirations.

One day we will look back on a few days in November, when thousands of young, aspiring leaders came together and believed in what seemed to be impossible: things will be better for the next generation of Arabs. Through entrepreneurship, one person's fledgling business of today will become the transnational corporation of tomorrow. Yes, these are lofty goals, but even Thomas Edison's ideas started with a spark.

*This article first appeared in The National on Sunday 14th November 2010

Microfinance is the need of the hour

Last month I was part of a team that travelled to Washington, D.C. and met with officials from the US administration. I learnt that President Barack Obama is holding an 'entrepreneurship in Muslim communities summit' next March in the US capital about an emerging phenomenon known as social entrepreneurship. A social entrepreneur is, according to Wikipedia, a person who recognizes a social problem and uses entrepreneurial principles to organise, create, and manage a venture to make social change. I had never heard of this concept prior to that visit, or so I thought. It turns out that the founder of one of the most popular forms of social entrepreneurship is the Nobel Laureate Mohammed Younis who developed the practice of microfinance in 1976.

Microfinance allows low income individuals who were previously outside the traditional banking and finance sectors radar screens, to have access not only to small amounts of funding but also to insurance, transfer and savings. These funds can be as low as a few score dollars and are usually requested by individuals who do not want charity but need funding to start a business and get a head start in life. By the time Mr Younis won the Nobel Prize for peace in 2006, Grameen bank had almost seven million borrowers - 97% of whom were women.

Younis’s work has lifted microfinance in to the limelight the world over. Similar concepts are now used in Asia, Africa and Latin America. But I wondered if such an idea could work in the oil rich Gulf States.

First, it may be unfair to place all the Gulf States in the same basket with regards to the need for microfinance. After all there are glaring differences between a demographically rich county like Saudi Arabia and a small but extremely wealthy state like Qatar. Although Saudi Arabia is much wealthier than Qatar overall, the latter enjoys the second highest GDP income per capita in the world and its citizens may not be in dire need for three and four-dollar digit loads.

The Gulf States can be roughly split into two groups, on one had are the three wealthier states in terms of GDP income per capita: Kuwait, Qatar and the UAE.

On the other hand are the three relatively less wealthy states in terns of GDP per capita: Bahrain, Oman and Saudi Arabia. These states have a significant lower income portion of the population that might benefit from this growing industry.

In fact, microfinance is very much alive and kicking in the Gulf today. In 2007 the Gulf’s first dedicated microfinance firm was established when Abdul Latif Jameel Group’s subsidiary, Bab Riq Jameel teamed up with Mr Younis’ Grameen Foundation to create Grameen-Jameel. This institution’s mandate was wider than its home base of Saudi Arabia and extended to North Africa, the Levant and Yemen. By April 2009, Grameen-Jameel reported that it had already brokered more than US$44 million through a Guarantee Fund in micro financing transactions in Egypt, Syria, Jordan and Tunisia.

Egypt, the most populated Arab country, saw the establishment by the Egyptian Gulf Bank of a US$8 million (EGP 46 million) microfinance firm that is envisioned to provide about EGP 400 million credit facilities by offering loans from EGP 4,000 to EGP 35,000 via its planned 300 country wide network.

The truth is in order for this industry to flourish in the Gulf and the Arab world, the regional economic regulators must reform their laws to make it possible for small businesses to be established from homes and bring down licensing costs. It will not make sense to encourage micro financing that involves extending a few hundred or thousand dollars to aspiring youth and then burden them with a series of debilitating fees, charges and hidden costs.

According to the United Nations Development Program, the Arab world needs to create 50 million new jobs by 2020 to accommodate its young and growing population. The government sector, which is a major employer in the region, will not be able to accommodate all the new job market entrants and it is time for the regional governments including those in the Gulf to think outside the box. Even wealthier states like Kuwait and Qatar can chip in and create microfinance funds for other Arab states citizens. The private sector in the region can also start extending loans either directly or by creating microfinance websites and portals.

Creative, widespread and pragmatic entrepreneurship is the only way for Arab countries to be able to provide work for tens of millions of young Arabs. Microfinance must be utilised as part of a spectrum of tools including economic reform and severe start up cost reduction. Only then will the region be able to provide jobs to our youth.

*This article first appeared in Moneyworks magazine, December 2009 issue

If you aren't succesful, move on

One of the main factors that discourage entrepreneurs from starting a business in the Gulf is the taboo of failure. Young men and women worry that if their project is not a success they will be forever labeled as failures rather than pioneers who tried their best. But the truth is that the taboo of failure does not only run in the young. It exists largely because it is not tolerated at the highest levels.

I always believe that each person should be encouraged to do their best. If they aren’t successful in a particular task, they should move on and keep the valuable lessons they gained from their experience.

In the Gulf it is no secret that many investment firms, real estate developers and banks have messed up. These companies over stretched their arms so far that they actually missed their targets and ended up in heavy debt. In some cases these firms had to resort to government bailouts - a term that was never used in the Gulf's dictionary.

So why are these institutions safeguarded from failure? Over 100 financial institutions have been allowed to fail in the US, including some of the most prominent ones, such as Lehman Brothers and Bear Sterns. In the UK, Northern Rock and HBOS are also examples. The same phenomenon can be seen all over the world but rarely in the Gulf.

We must keep in mind one rule of life that will never be changed: taking high risks to secure high returns also has a downside. No government in the world will be able to reverse that rule. When Gulf Bank in Kuwait took unnecessary risks by venturing into the derivatives and options markets - even though one board member who later became its chairman admitted that he had no idea what derivatives are - the bank failed miserably and had to be bailed out to the tune of KWD375 million. Rather than allow the bank to go under or be bought by another financial institution, the chairman stood down in favour of his brother, who, as a board member was witness to the risk taking.

In the UAE one government-owned developer is responsible for most of the owner’s debt and yet no changes have been made at the top. Also, banks across the Gulf have irresponsibly lent over US$10 billion to Maan Al Sanea’s Saad Group. This issue is so sensitive that a war of words broke up between the governors of the central banks of the Gulf via the Arabic media. Each one blamed the others for lack of supervision. Frankly, they are all responsible, but no one is willing to admit failure because this word does not exist in our dictionary.

In another case one Kuwaiti businessman committed suicide after allegations that he misappropriated several million dollars. Compare this with Bernard Madoff who is responsible for a $65 Billion fraud scheme and went about his life casually until his sentencing. In the Gulf you see, failure is taboo.

When a person is at the helm of a job, he may try his best and err. He should be replaced, but, ultimately, life goes on. There is no need to borrow billions of dollars to invest into bailing out failed individuals or the foreign firms they invested in to avoid labeling these investments as failures. After all, investment is a part of life; you can’t win all the battles. Bailing out these banks and investment institutions actually sends the wrong message in some instances. That message is: "You can be irresponsible with the public’s money but the government will jump right in and save you." The correct message should be: "Try your best but if aren’t successful move on with life."

Governments will never be able to secure jobs for all the region's youth in the public sector. Expanding the private sector and encouraging entrepreneurship are the only ways that we will be able to accommodate the aspiring youth of the region and secure the growth that we aspire to. In that process, failure is not uncommon. Not every new business that is started will be a success. By maintaining the taboo of failure, however, we are discouraging people from starting businesses, and that is the real failure of our societies.

How do we in the Gulf expect the young and hesitant entrepreneurs to take risks and start their own businesses when our governments frown upon failure?

*This article first appeared in Moneyworks magazine in the November issue.

What I Learned from the Last Big Meltdown

Markets crashing, panic in the air, and a taste for some entrepreneurial investment? There's no time to start a business like a recession.

People generally shy from starting a new business during a financial crisis, I however did just that. It was the autumn of 2000; the world had just gone through a financial crisis known as the dot-com bubble that although not as large as the one we are suffering from today was historic nonetheless.

I had just graduated from university two years before and was itching to start my own business. I found a dormant brokerage licence in our company books that was suspended on the orders of my late father just prior to the great UAE crash of the late 1990s. Emaar had reached 140 dirhams then, although no one really knew what the record price was since all trading was conducted over the counter (or under it) as there was no official stock markets. Still, brokerage houses, twenty of whom existed then recorded the prices and a lot of work was done on the basis of trust. As Emaar broke the two digit ceiling my father ordered the company to cease work since it looked like a crash was imminent.

He feared that buyers would not honour their commitment to pay these exorbitant prices, and sellers would defer selling stocks since a better price was a phone call away. However, the one reason that resonated the most in my mind was him saying that if people bought at such high prices and then the market crashed it would be said that the victims bought their shares through the family firm and my father would have none of that. Of course, the market rallied further still and for a not insignificant amount of time. My father had said then "Emaar’s share prices are like a balloon in a party, everyone takes turns in blowing air into it until eventually it will explode in someone’s face."

More than two years later, when I was 22, I dug into our files, dusted off the central bank document that read Al Saud Stocks and Bonds and received permission from my father to reactivate the firm and base it in Dubai. I had two options in mind, each of them for a niche market. One was for what was then the burgeoning Shariah-compliant industry; then my idea was to start a brokerage firm that only sold shares of companies that complied with Shari'ah law. However, iHilal was just starting, and I remember going to meet Ramzi Abu Khadra, its founder and CEO in the spring of 2001. His idea was very similar to mine and I didn’t think it would be entrepreneurial to start a business that already existed.

So I turned my attention to the large ethnic groups in the UAE, which included Indians and Westerners. The latter were overserved but the first weren’t served at all. Then came the challenging part of finding the right partner to work with, since the Indian stock market was quite tightly regulated and required local operations to buy and sell shares. By serendipitous fortune, a childhood friend of mine had recently become acquainted with an Indian gentleman called KV Shamsudheen, who had mentioned to him that Geojit, a reputed South Indian brokerage firm, was looking for a tie up with a UAE-based brokerage.

After meeting with the founder, CJ George, I realised that it was a perfect match. A series of meetings culminated in a memorandum of association. Finally, the UAE Central Bank sent us notice that the reactivation of the brokerage licence has been authorised by its Board of Governors. I decided to change the company’s name to Barjeel owing to my fascination with Emirati and Gulf architecture (Barjeel denotes windtower). Because of the great network and professional reach of our Indian joint venture partner we were able to attract the best possible candidates to run the brokerage.

Years later I continue to refer to my experience of setting up Barjeel Securities in my entrepreneurship lectures to the senior year business students in Dubai Men’s College so that they may be encouraged to try starting a new business themselves. What I learnt mostly from my father was not to follow the herd mentality and ratchet up businesses when markets are booming; it may be better to be more prudent. I also learnt that recessions offer plenty of opportunities to start new businesses: people in the future will look back and bemoan the business opportunities they missed in Dubai under the pretext of the current financial crisis.


*This article was originally printed in Gulf Business in August 2009.