UAE to launch special loans scheme for SMEs

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SME STATISTICS: Of the 260,000 trading and industrial companies in the UAE, 208,000 – or 80 percent of them – are SMEs, according to Ruwad Establishment. (Getty Images)

The UAE government is launching a loan scheme for small and medium-sized enterprises (SMEs) struggling for finance amid the global financial downturn, senior ministers revealed on Thursday.

High demand for loans from SMEs was expected in the short term and banks needed to demonstrate greater willingness to extend finance to these businesses, which were a key driver of the Gulf state’s economy, according to UAE Central Bank Governor Sultan Bin Nasser Al Suwaidi.

He was speaking in Duabi at the launch of an initiative by the Ministry of Economy, Ministry of Labour and the Central Bank in partnership with several hundred bank branches across the UAE to provide loans to entrepreneurs looking to start SMEs.

“One of the lessons of this financial crisis is to focus on SMEs,” said Sultan Saeed Al Mansouri, Minister of Economy, speaking through an interpreter.

“We are looking at facilitating finance for these institutions given the current economic situation worldwide.”

Stricter lending requirements by banks due to a shortage of liquidity have meant SMEs have struggled to secure loans during the financial crisis.

The government defines a small business as a company which employs less than 50 staff and a medium business as a firm employing between 50 to 100 staff.

SMEs were the “stepping stones” towards a successful economy, Al Suwaidi said.

Al Suwaidi seemed to suggest the government would offer capital to support SMEs initially, saying it would provide “full collateral” in the first phase of the initiative, before reducing its financial involvement following the easing of the liquidity pinch in the credit markets.

He acknowledged the risk banks would take by extending loans to SMEs, admitting the rate of failure of startups was considerable.

But if SMEs were successful as well as benefiting the economy, the returns for banks were “huge”, he added.

Banks could set their own conditions and regulations for providing loans to determine whether SMEs were worthy of funding, he said.

“I’m sure that banks will participate in this if they can define the terms and conditions clearly,” he said.

To help it improve the support given to SMEs, the government has studied the experience of SMEs in over 28 countries including Germany, Italy, Canada, Malaysia and Egypt.

The government plans to replace local laws and regulations controlling SMEs by implementing legislation at a central level, Al Mansouri said.

Saqr Ghobash, Minister of Labour, said the government needed to redraw regulations and laws to boost the participation of nationals in SMEs and attract foreign workers with skills nationals could benefit from.

Of the 260,000 trading and industrial companies in the UAE, 208,000 – or 80 percent of them – are SMEs, according to Ruwad Establishment.

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READERS' COMMENTS

SME support
Posted by Jane Eddy, Dubai, UAE on Saturday 6 June 2009 at 10:09 UAE time

This is a much needed initiative, however, like all things, great ideas can be ruined with lengthy implementation. Please for the sake of so many distressed businesses, move with this initiative with great speed!

Great idea but the devil is in the details...
Posted by Sand Jockey, Dubai on Saturday 6 June 2009 at 09:06 UAE time

Ah, yet another great idea that will likely fail in the implementation phase.

The biggest question of all will be what SMEs will be covered by this? Are they talking about Emirati-owned SMEs (few and far between) or are they talking about all SMEs.

As Geriant says most SME founders / owners are expats such as myself and having banking support without having to put up 90% or even 110% of the requested loan amount (yep, that is what NBD asked for as security) would enable us to expand faster and help grow the economy.

As I said, only time will tell...

SJ

Better Option to Spend Money
Posted by Dude, Dubai, United Arab Emirates on Friday 5 June 2009 at 15:32 UAE time


Wise move and better for UAE economy than the rescue plan for projects that failed to sell and will fail to sell in future.

Don't forget the visas
Posted by Geriant, Dubai, UAE on Thursday 4 June 2009 at 17:07 UAE time


This is an excellent initiative, which will be widely supported by entrepreneurs who see the UAE as a wonderful opportunity. Just remember that much of the expertise in SMEs is imported, so make sure there are proper visa provisions, including provisions for redundancy etc. and property ownership.

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