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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