Mid East institutions need greater understanding of entrepreneurship, says Belhoul

Speaking ahead of his address at next week's 'Entrepreneurs in Dubai' event - the region's biggest forum on driving entrepreneurial leadership in management - Faisal Bin Juma Belhoul said entrepreneurs in the Middle East still have to rely on private financing and the scenario is not likely to change in the near future.

"The bulk of the current financial institutions operating here in the region are conventional banks, and conventional banks think conventionally," said Belhoul, Founder & Managing Partner of Ithmar Capital and Executive Vice Chairman of Dubai's Belhoul Group Holdings.

"Entrepreneurship is very risky and banks don't want to take such a risk - there is a mis-match in objectives here.

"But the same is not much better in the developed world. Entrepreneurs are traditionally either self-financed or are supported by the three 'Fs' - family, friends and fools - or, if lucky, by angel investors. Real Entrepreneurs are people who know that they are going to be successful from day one and when they do meet with success they can be a jackpot for investors, but in reality the chances of success are very low."

And Belhoul, a member of the Young Arab Leaders organisation, says greater institutional understanding of the needs of small companies is essential.

"In the Middle East there needs to be more institutions that understand entrepreneurship and understand the outcome of entrepreneurship and will support it all the way. Some moves have been made with the setting up of the Mohammed Bin Rashid Establishment For Small Enterprises, Emirates Bank International's Tumooh project and the Sheikh Khalifa program for SMEs in Abu Dhabi but even these are not enough. These tend to attract more of lifestyle-focussed small enterprises when more focus is needed on start-ups with big potential business success. Entrepreneurship, after all, is about the big dream, which starts small."

Belhoul said his own company does support entrepreneurship but at a later stage of maturity.

"We work with entrepreneurs who are currently in business and want to move to the next level and which have the potential to scale up and the skill sets to be utilised for growth," he said.

"We are not an angel investor - these tend to be sector specific with segmental understanding, and tend to get involved at a start-up stage. We are not sector specific but act a strategic partner to companies we back, and assist them more in non-organic growth strategies through M&A"

Belhoul also said that one company in which Ithmar Capital has invested - Future Leaders Training Centre - is being developed into an institute for Entrepreneurs which will offer education up to masters degree level.

"We are growing the original concept, adding value, which is what private equity is about," he said.

Returns on private equity investment in the Middle East, he said, are typically running at between 25-30% a year. "The returns are far greater than other asset classes, but not as great as those from venture capitalist activities if investments succeed, but then, the risks are lower."

But regional banks, said Belhoul, are also lagging behind in private equity initiatives.

"The banks need to have more guts going forward, particularly in acquisition finance for private equity transactions, which, by the way, is still not commonly available here from them. In essence the regional banks are only interested in security backed lending.

"The banks will have to take a few steps forward in the provision of financial services to assist the development process. There is a huge way to go."

However, entrepreneurs can still obtain start-up capital from private individuals. "It is available here," said Belhoul, "although it is not exposed or easily accessible, it is there. And entrepreneurship is alive and kicking in the region as evidenced by the number of start-ups which have emerged from the free zone hubs such as Dubai Media City and Dubai Internet City."

At 'Entrepreneurs in Dubai,' which runs at the Dubai International Convention Centre from May 23-25, Belhoul will address delegates on 'Inspirational and Effective Leadership to Guide Family Companies Through Change.'

But the man who was instrumental in converting the Belhoul family business into a professional corporate conglomerate says there is no template for success.

"Change is something that is pro-active or defensive, something that if you don't do, you have to be lucky enough to survive, or you fail," he warned.

"There is no success model - every case is different. Leaders have to understand the risks and identify the aims to deal with the risks and tap into opportunities," he said.

Succession issues, explained Belhoul, were central to change within family businesses.

"It's no good saying Sharia law will take care of it - it lays down regulations on how assets can be divided up - it's giving the mathematics of the equation if you like - but the process is more complicated than that. Succession has to be addressed, then the objectives outlined and the buy-in sought from all stakeholders.

At 'Entrepreneurs in Dubai,' Belhoul will join a powerful line-up of international and regional business leaders and successful entrepreneurs.

The global line up includes high-profile tycoons such as Donald J. Trump, who will address the audience via live video-cast, Dame Anita Roddick, who founded The Body Shop and easyJet's flamboyant boss Stelios Haji-Ioannou.

"It is an excellent assembly of speakers," said Belhoul. "The opportunity to interact with business leaders of this level is an exceptionally valuable experience."

A free-to-attend exhibition of services for SMEs will run alongside 'Entrepreneurs in Dubai,' which is organised by IIR Exhibitions Middle East in conjunction with the Mohammed Bin Rashid Establishment For Young Business Leaders.

"Faisal Belhoul is among the next generation of Middle East business leaders and his views and convictions will be key indicators of development for both speakers and delegates alike," said Jessica Sutherland, General Manager, IIR Middle East.