The Banking Executive Magazine - May 2026 Issue - New

Islamic Finance technical, financial, and Shariah cri- teria, IFETAA helps generate reliable SME pipelines, reducing information asymmetries and origination costs. This process increasingly integrates digital tools and data-driven screen- ing approaches, reflecting the sec- tor’s shift toward more efficient and technology-enabled SME origination. Technical assistance to SMEs improves post-disbursement per- formance. Stronger financial man- agement, operational efficiency, and governance at enterprise level trans- late into lower default risk and better portfolio quality for banks. Policy and regulatory advisory serv- ices reflect the fact that SME finance is shaped as much by regulation as by credit decisions. Structured dia- logue with regulators and standard- setters helps reduce legal uncertainty and align frameworks with Islamic and blended finance instruments. Financial de-risking and risk-sharing mechanisms complete the architec- ture. In collaboration with guarantee agencies and development finance institutions, IFETAA supports portfo- lio- and transaction-level risk-sharing solutions that reduce credit risk and ease capital constraints without com- promising prudential standards. For financial institutions, the practi- cal value of IFETAA lies in making engagement with SMEs more accessible by reducing costs and uncertainty. By delivering invest- ment ready pipelines, harmonized appraisal tools, and structured risk sharing arrangements, the pro- gramme helps banks expand their SME portfolios without compromis- ing prudential standards. This ap- proach lowers origination costs, strengthens portfolio quality, and en- ables Islamic banks to deepen real economy engagement in a disci- plined and scalable manner. STRATEGIC RELEVANCE FOR ARAB BANKS Across the Arab region, banks are operating in a context of strong liq- uidity, expanding Islamic finance balance sheets, and rising expecta- tions around real-economy engage- ment. At the same time, economic diversification strategies, demo- graphic pressures, and sustainability agendas are placing a renewed focus on the role of SMEs as drivers of growth and resilience. For many banks, this creates a familiar ques- tion: how to translate capital avail- ability into productive financing without compromising long-term sta- bility. IFETAA speaks directly at this mo- ment. Rather than asking banks to change who they are, the pro- gramme is designed to work with how banks already operate—gradu- ally, selectively, and with a strong emphasis on quality. By strengthen- ing the ecosystem around SME fi- nance, IFETAA helps make engagement with smaller enterprises more feasible, more credible, and more aligned with banks’ long-term positioning in their markets. For financial institutions, this is where IFETAA’s value proposition be- comes tangible. By strengthening the surrounding ecosystem, project preparation, institutional coordina- tion, and risk-sharing arrangements, the programme helps narrow the gap between intent and action. It enables banks to engage with SMEs that are better prepared, operating within clearer frameworks, and embedded in partnerships that reduce uncer- tainty rather than add complexity. Looking ahead to 2026–2027, IFE- TAA will focus on operationalizing its regional partnerships, scaling pipeline development across priority countries, and advancing work on Is- lamic guarantees and blended fi- nance instruments. The programme will also deepen its engagement with Arab and African banks through tar- geted capacity building, digital ap- praisal tools, and the development of country level child projects designed to mobilize external financing at scale. Through UAB, IFETAA is posi- tioned to reach a broad spectrum of Arab financial institutions, ensuring that the programme’s tools, insights, and capacity building efforts directly support banks’ strategic priorities across the region. For more information, please reach out to Aymen Ahmed, Senior Pro- gramme Officer at [email protected] ISSUE 209 MAY 2026 the BANKING EXECUTIVE 45