Abu Dhabi’s move to introduce a government guarantee on all loans to small and medium-sized enterprises (SMEs) will “change the business landscape” in the emirate and may encourage other governments in the region to follow suit, according to the executive chairman of Wamda Capital, Fadi Ghandour.
Abu Dhabi Investment Office (ADIO), the Department of Finance and First Abu Dhabi Bank launched the SME Credit Guarantee scheme on Tuesday. The SME Growth Loan will provide more accessible financing opportunities for SMEs based in Abu Dhabi through a guarantee given by the government to banks.
The scheme relieves SMEs of the risk associated with raising capital from banks. It guarantees up to 70 percent of loan value for UAE national-owned companies and up to 60 percent for expat-owned companies, which will be provided to the bank in case of default, enabling banks to secure a certain level of lending to the market.
Ghandour currently manages investments in early stage start-ups through angel fund Mena Venture Investments. He told Arabian Business: “SMEs have historically faced huge challenges in accessing finance, this initiative addresses this challenge, thus matching the importance of the sector with facilitating finance thus allowing SMEs to thrive. Banks are extremely conservative, so the government steps in and alleviates a big part of that risk.
“Finally this is happening, it will change the business landscape in the Emirate and maybe get others to do the same.”
The announcement is part of the Government’s Ghadan 21 economic acceleration program announced last September by Sheikh Mohammed bin Zayed al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces.
It comes as the government strives to increase the share of SMEs’ activity in Abu Dhabi from 16 to 23 percent by 2021.
Ghandour, who was a founding partner of Maktoob.com before it was acquired by Yahoo! for $165m in 2010, added: “I think this is an extremely important move by the Abu Dhabi Government, it recognizes the importance of SMEs as engines of growth in the economy, and as the primary sector for generating new employment.”
The news came on the same day that Hub71 announced the first four start-ups which plan to set up operations in the technology hub.
Hub71, located in Abu Dhabi Global Market Square on Al Maryah Island, is powered by Mubadala, Microsoft, Abu Dhabi Global Market with the backing of the Ghadan 21 program, which is working to accelerate the Abu Dhabi economy.
The tech hub aims to foster start-up success, innovation and growth and is uniquely positioned to bring together government entities, corporations, academics and start-ups.
Mahmoud Adi, CEO of Hub71, said: “When you consider that SMEs make up 53 percent of the GDP in the UAE, we hope, as a tech ecosystem, that we will help to both - increase that percentage point and ensure that the existing fifty-three percent have the best opportunities to grow.”
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