Dubai's NBF Enters Antwerp Lending Market

RAPAPORT... The National Bank of Fujairah (NBF) has launched arepresentative office in Antwerp as it looks to expand its business lending toestablished diamond traders. The Dubai-based bank targets wholesalers with secure sourcesof income and solid product traceability, its CEO, Vince Cook, told RapaportNews last week. The new office will help it improve its market knowledgeand strengthen its relationships with those clients, while benefiting fromBelgium's strong compliance regime, he said. "This is a recognition of Antwerp's position in the globaltrade," Cook said. "To not be there seemed to be a bit of a gap in ourlonger-term aspirations." NBF has lent to the gold and jewelry industry for many years,and later decided to enter the diamond space. Aware that the sector operated ina different way from the industries it knew, it launched its diamond-focusedoffice in Dubai in 2015 by hiring a team from the defunct Antwerp Diamond Bank(ADB). Its diamond business has grown, but it became clear that it neededa base in Belgium to develop the division, as many of its clients hadoperations in both Antwerp and Dubai, Cook noted. It will still provide itsloans out of the Dubai office, as it's not a licensed bank in Belgium. Reliable businesses NBF's practice of creaming off the clients with the most suitable business models enablesit to expand in a sector from which other banks are retreating, Cook explained. ADB,ABN Amro, Standard Chartered and India's ICICI Bank have all left the businessor scaled back their lending in recent years.While NBF does finance established companies' rough purchases for manufacturing, most of the trade credit it provides is for buyers and resellers of rough, it noted.The drop in bank credit has mainly been in the polishing sector,where market fluctuations have put pressure on banking relationships, Cookadded. Firms focused on mass manufacturing of small diamonds have lost outsignificantly, as have small traders that operate without knowing for sure thatthey can sell their goods, he said. "If you're taking diamonds from an established mine andproducing them to order for one of the big jewelry brands, things haven'tchanged much," Cook said. Many banks that serve a wide range of market players, fromhuge cutting businesses to small traders, have had bad experiences, theexecutive observed. Those lenders inevitably come away with a negativeperspective of the market, as that broad spectrum of clients will alwaysinclude some failures, he said. "We're coming at it from a slightly different point of view- at the wholesale end, much closer to the original source of supply, and then[we're] taking a very selective view as to what parts of the industry we'reprepared to finance," Cook explained. "That doesn't mean we won't havechallenges, but the nature of the business will be very different from atypical Indian bank." Strict on sourcing Requiring reliable diamond sourcing is a key part of thatfocus on secure business activities. NBF will only lend to companies thatobtain stones from a list of acceptable sources that meet compliancerequirements, Cook said. It will also want to know for what purpose its clients'buyers will be using the goods, ensuring there is real demand at the consumerend, he added. The recent alleged $2 billion fraud by Nirav Modi and MehulChoksi against Punjab National Bank has created increased awareness of thedangers of sham diamond sales carried out purely to extract loans. Meanwhile, traceability initiatives such as the GemologicalInstitute of America's Mine to Market (M2M) program provide information on acompany's diamond supply that wasn't available a few years ago. While there aremany other sources of information on a business's legitimacy, provenanceinitiatives will increasingly play a part in banks' lending decisions, he said. "They're all related in the sense that a diamond that hasgood provenance in a credible way will be more marketable," he continued. "Ifit's more marketable, from a credit-risk perspective, it's easier to finance." Antwerp attraction With NBF now on the ground in Dubai and Antwerp, it sees noneed to add any further offices for the time being, as those two hubs cover thebulk of its client base. Indeed, the bank's decision reinforces the attraction of thecity's diamond industry to lenders, argued Ari Epstein, CEO of the AntwerpWorld Diamond Centre. "Anyone that does his homework and is prepared to acquirethorough knowledge about the diamond industry will recognize that the manystrict measures applicable to the diamond industry enable a financial serviceprovider to develop a robust business," Epstein said. Image: Vince Cook (left) with National Bank ofFujairah board members, and Mohamed Issa Hamad Abushahab, the UAE's ambassador to Belgium, at the office launch. (National Bank ofFujairah)