Banks offer loans secured by shares to boost client ownership

KUWAIT CITY, Aug 21: Several major shareholders of listed companies in Kuwait are actively seeking financial facilities from local banks to increase their ownership stakes by acquiring additional shares, according to market sources. In response, banks have shown a willingness to extend financing by offering loans secured against shares, along with additional guarantees to ensure repayment.

The delegations from various banks have recently visited prominent clients in the market, particularly those engaged in sectors requiring further development or expansion. These clients have been offered exceptional financing rates, with some banks even extending direct personal loans to boost their ownership positions. Banking insiders noted a significant liquidity surplus and high deposit levels in the market. However, the scale of new projects has remained below expectations, as prolonged implementation cycles continue to slow progress. Despite calls for accelerating the award and execution of projects, little has changed in practice. Sources highlight that the time from announcing a project award to its signing and implementation often spans more than two financial quarters, a delay that has become a recurring issue in the market.

Historically, the Kuwaiti market has absorbed substantial banking liquidity, but it has also experienced periods of stagnation. Recently, there have been notable breakthroughs driven by changes in business models, client solvency, and more stringent risk assessments. Banks have increasingly focused on evaluating these factors to ensure the soundness of their financing decisions. One key factor contributing to delays in disbursing the full amounts allocated for projects and capital spending is the lengthy bureaucratic and procedural processes. Even when procedures move smoothly, grievances, complaints, or objections from competitors can further slow progress. Despite these challenges, many clients who have secured financing remain optimistic about their companies’ future performance. They expect stable distribution rates to contribute to meeting financial obligations, given their companies’ regional presence and anticipated growth in operational contracts during the second half of the year.