Sheikha Hanoof Bint Thani Al Thani, is a Senior Associate at Qatar Investment Authority
What has been the impact of COVID-19 on the financial services industry in Qatar?
Overall, Qatar was in a strong macroeconomic position to combat the pandemic given its young demographic, LNG export wealth and successful supply chain restructuring in response to the regional blockade imposed in 2017. Cost rationalization and new revenue streams have helped flip the fiscal balance positive in 2018. This was sustained in 2019, allowing Qatar to buffer the fiscal and economic shocks of COVID-19.
Discerning fiscal policies such as a QR75 bn government stimulus package, lower interest rates and launching a “National Guarantee Program” providing guarantees to local banks at a total of QR5 bn went a long way to dampenCOVID-19 headwinds. In addition, a strong balance sheet helped Qatar absorb the shock of the pandemic, which includes a sizeable Sovereign Wealth Fund and a US$10 bn government bond, which offset revenue deficits from falling energy prices. More specifically, the impact on the financial services industry in Qatar has varied depending on the sub-sector and the nature of the business portfolio.
The banking sector exhibited strong performance in 2020 with solid loan (+9%) and deposit (+7%) growth. While the combined banking sector profits declined by around 13% due to higher loan loss provisions (+70%) and lower interest rates, all large banks remained profitable. On average, Qatari banks delivered mid-single-digit total returns to shareholders, above U.S. and European banks.
Aligned to the Qatar Vision 2030, large players in the market have taken steps to further support Qatar’s economic growth, such as the recently announced Masraf Al Rayan and Al Khaliji Bank merger, resulting in the creation of a Top 3 bank in Qatar. In line with other stock markets, increased share price volatility following the outbreak of COVID-19 resulted in a substantial increase in stock trading volume in the Qatar Stock Exchange (c. 50%, compared to historical average) and increased retail investor participation.
One major silver lining of COVID-19, which will outlast the pandemic, has been an accelerated rate of digitalization processes. This has manifested itself in the financial services industry through an increased adoption of contactless cards, digital payments, digital banking services and QCB’s “Qatar Mobile Payment System” (QMP), which provides a new and safe method for immediate electronic payment.
Do you think the pandemic has affected career opportunities for females? If yes, how?
Research has proven that pandemics do not have a gender-neutral impact and tend to exacerbate pre-existing inequalities. Given the fact that globally, women earn less, save less, and hold less secure jobs, their ability to absorb economic shocks is therefore lower than that of men. As per the UN, of the 1.7 million jobs expected to be lost in the MENA region due to the pandemic, women account for 40% of that number, even though they make up a mere 21% of the labor force. However, it is important to note that while COVID-19 is expected to have disproportionate effects on women and their economic status regionally, in Qatar, the statistics prove otherwise. Data released by the Planning and Statistics Authority illustrate that Qatari women have become more economically active since the pandemic started and an unprecedentedly high number of Qatari females have sought work for the first time in 2020. One possible explanation is the widespread of remote/ flexible working arrangements, which has allowed for greater female participation as women can more efficiently commingle work with domestic burdens that tend to have a disproportionate impact on them, particularly of childcare. On the other hand, labor flexibility for women can be a double-edged sword as it comes with greater vulnerability in the form of lower job security and wages due to decreased hours. Another reason for the positive direction of Qatari female participation in the workforce is possibly a byproduct of the accelerated rate of digitalization processes. The broader digitalization wave did not only grant women more access to the internet, but it has given them the ability to leverage this opportunity to grow their businesses online or join the labor force with transportation issues and social norms regarding mixed gender work environments not being an issue anymore.
What do you think needs to change for the financial sector to attract more female leaders?
I think the financial sector has historically been dominated by men, and to combat that, companies in the industry need to be intentional about diversity in the recruiting process, not to simply fill quota’s, but with a deep understanding that numerous studies from reputable experts in the diversity space have shown that organizations led by gender-diverse teams yield better financial results than the industry average. Despite the well-documented benefits of diversity, the representation of women on company boards remains subpar. I believe it is vital to increase women in C-suite roles as it often propels executives to board seats. A significant barrier for women has been the lack of representation in senior leadership roles despite notable achievements recently. For example, QIA is a proud investor of the highly successful financial companies London Stock Exchange and SoFi who both have strong female representation on their management teams and executive boards. Another example is Starling Bank, a leading UK digital bank that QIA recently invested in, which has been founded and is led by Anne Boden, a distinguished banker.
Do you think the recovery from COVID-19 will happen in the next 1-2 years or will it take longer?
The unprecedented level of government stimuli in Qatar and worldwide has gone a long way to alleviate the impact from COVID-19. Qatar is also making excellent progress on the vaccination front, with the expectation of completing the program within the next 3-6 months. In addition, energy prices are back to pre-crisis levels, which gives the Government of Qatar ample fiscal room to gain traction for robust economic recovery, helped by long-standing strengths such as its high rate of ICT adoption, well planned infrastructure, and robust financial system. Despite forecasts that the aviation industry is not expecting to go back to pre-crisis levels until 2024, nonetheless the successful completion of the National COVID-19 Vaccination Program, coupled with the fast approaching World Cup 2022 should expedite the recovery of Qatar’s tourism and aviation sectors.
Overall, I think the near-term global outlook remains highly uncertain and different growth outcomes are possible at this point. An upside scenario with successful COVID-19 containment and faster vaccination processes could result in accelerated global economic expansion. Contrarily, a downside scenario in which mutations of the virus result in infections continuing to rise and the rollout of vaccines or boosters (if required) are delayed could significantly impede recovery. The pandemic has also intensified risks around debt accumulation, which could hold back growth over the long term in the absence of robust reform efforts. While the global economy seems to have entered a mild recovery, after a 4.3% contraction the previous year, policymakers face tough challenges in public health, central banking, debt management and budget policies to set the foundation for strong and healthy growth.