UAE banks devise plan to help struggling SMEs

Abdul Aziz al-Ghurair, chairman of the UAE Banks Federation and chief executive of Dubai's Mashreq bank.

Abdul Aziz al-Ghurair, chairman of the UAE Banks Federation and chief executive of Dubai's Mashreq bank.

Banks in the United Arab Emirates have agreed a plan to help small-and medium-sized businesses (SMEs) struggling with debt, including suspending payments and restructuring loans.

Many businesses in the Gulf have had difficulty repaying hefty debts after a fall in commodity prices and a slowing economy bruised their balance sheets.

Under the proposal outlined on Wednesday by the UAE Banks Federation, companies owing debt to more than one bank and finding it tricky to repay will be able to restructure future payments.

Payments could also be suspended while businesses reach a deal on their debt with lenders, the association of banks said.

"This again reflects banks' commitment to apply a co-ordinated approach, to alleviate SME funding difficulties and continue banks' support to the SME sector being vital to the national economy," said Abdul Aziz al-Ghurair, chairman of the federation and chief executive of Dubai's Mashreq bank.

Several banks have reduced lending to SMEs after a spate of defaults.

Some struggling business people opted to depart the country, leaving behind unpaid debts. A senior banking official in November estimated the amount owed by those fleeing reached around 5 billion dirhams ($1.4 billion) last year.

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Posted by: Abdul Hamid

SME sector contribute 60% of UAE GDP but only 3% of banks total lending to this sector. Doesn't it tell a different story that how this sector is ignored by the Banks. And this is the main cause for many SMEs to borrow money at high cost from banks or from private lenders. In result their business proposition doesn't survive long. Beside remedial regulations Banks should increase its lending portion to SMEs in a justified approach. However the current proposed arrangement is good and should be used prudently....

Posted by: Red Snappa

Here we go again, 2009 revisited, on the the slide again, the costs of running a SME in this environment are simply prohibitive, it is not a workable model.

Trade licences , visas, premises and audits are simply too expensive. There should be be a cheap start up package that remains in place for the first 3 to 5 years of operation, until the business is properly established and proven profitable.

It is no longer attractive to start a small business here, the overheads are too high and unsustainable levels of debt ensue.

Posted by: M Ajam

We have heard many things like this before but we still cannot get a loan unless we guarantee it personally.

Further, when banks consider loans - they can consider less than half of the previous six months income.

If approved, after submitting a large number of documents, then the interest rate is high.

Even companies that have been ranked on the SME 100 are not even getting any business from Dubai organizations.

We would be happy to self finance, if you help divert some work to SME instead of international providers who do not even have presence in UAE and pay us on time.

Posted by: Sahil

But why Mashreq Bank is cancelling cards for customers without any information to clients.

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