Small businesses 'struggling to access credit'

LOAN ACCESS: Many small businesses in the UAE are struggling to get credit, according to a new report. (Getty Images)

More than half of the small businesses in the UAE are struggling to access credit, according to a new study.

Many of the country's small businesses are facing acute shortage of financing from banks, the study by global consultants Dun & Bradstreet (D&B) claims.

Banks in the emirates have toughened up their rules on lending amid the worldwide credit crunch and the study said more than 50 per cent of small businesses are being impacted.

They also face high interest rates for unsecured lending (around 15 per cent), which are much higher than in Western markets, UAE daily Gulf News reported on Monday.

The D&B Industry Perspectives: UAE SME Lending report, was based on a survey on key industry leaders from August to October 2008.

D&B's study showed that 55 per cent of SMEs were unable to get the credit they required and more than 50 per cent of SMEs surveyed were unhappy with the interest rates.

The study showed that banks in the UAE generally reject between 50-70 percent of the applications for credit to SMEs, largely due to high perceived risk of lending in the country, as well as applicants' failure to meet tight loan requirements and conditions.

"The main reasons for banks' reluctance in lending to SMEs in the UAE include lack of organised financial statements...leading to uncertainty among banks regarding SME repayment ability," Karthik Ganesan, D&B consultant for research and advisory services, told the paper.

Dubai has the greatest number of small businesses, which constitute 45 per cent of the UAE total. About 32 per cent are in Abu Dhabi, while 16 per cent are in Sharjah and seven per cent are in other emirates.

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