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Thu 21 Nov 2019 07:11 AM

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SMEs are the lifeblood of the UAE and must be supported, says Etihad Credit Insurance CEO

Etihad Credit Insurance supports the export and re-export of UAE goods and services

SMEs are the lifeblood of the UAE and must be supported, says Etihad Credit Insurance CEO

Massimo Falcioni, CEO of Etihad Credit Insurance

In times of weak global economic sentiment, it’s important to bolster business confidence so local industries can continue to grow.

That’s why the seven emirates have come together to form Etihad Credit Insurance (ECI) – a specialised federal institution that supports national export and re-exports in a range of ways.

Formed in late 2017, ECI supports the export and re-export of UAE goods and services – as well as the foreign investments of local companies – through the provision of export credit, financing and investment insurance products.

The ECI initiative forms just one of several measures drawn up to accelerate and sustain the UAE’s National Economic Diversification and Development plan into the future.

Through ECI offerings, any UAE-based company – whether local or global – can be protected against short to long-term credit risk and offer more competitive rates for international buyers.

There are two main reasons companies choose to secure their exports – to offset commercial risk, or political risk. Geopolitical risk protection is imperative for export investments and protects against circumstances such as war, riots and changes in government policies. In today’s uncertain economic times, such policies can help to instill more confidence and spur business activities.

Bolstering business sentiment

Current confidence in global economic activity is low. The World Trade Organisation predicted just 2.6 per cent growth for this year, down from three per cent in 2018.

Given this lack of confidence, it is the goal of the ECI to buoy business faith by being a facilitator between sellers and buyers – we create confidence by securing payments between the two parties.

Instead of selling through traditional banking letters of credit or advance payments, companies can become more competitive by selling with our open credit terms – so each invoice lists either 30, 60 or 90-day payment periods. With these types of flexible remittance terms on offer, companies can sell more.

Put simply, the UAE can win over international clients by offering open credit terms – it adds strategic value for buyers. By giving generous payment leeway, local businesses can gain an edge over global competitors.

Sustainable development

As a nation, the UAE is focused on achieving sustainable development through cultivating a diversified economy. Its success is predicated on the growth of non-oil industries, such as petrochemicals, aluminium, vehicle parts, services, F&B, pharmaceuticals and project engineering.

The UAE currently brings in $493 bn annually in non-oil income – around 70 per cent of the national GDP. The government aims to increase this figure to 80 per cent by 2021 – that’s one of the reasons why ECI was formed, to help accelerate businesses.

The country offers political stability, as well as an enviable geographical location. Currently 65.7 percent of the country’s exports are Asia-bound, followed by Europe (13.7 percent) and Africa (9 percent). The UAE remains a fantastic trading, export and re-export location with superior access to global markets.

Education is key

Educating entrepreneurs in the region is one of our challenges. Our organisation recently conducted a survey of SMEs and we found that only three of small businesses offer credit terms, while 97 per cent offer cash terms. These findings evidence the fact that the Gulf is still underpenetrated for credit insurance.

Creating a good product or service is all good and well, but in reality it’s only half of your company’s story – you also need to have access to financial and insurance solutions that suit your business and client needs. ECI is working with the UAE Ministry of Economy to educate businesses.

Geopolitical relations

Geopolitical risk has heightened all over the world of late, including in the Middle East, Europe and Latin America. Today, there are new rules of doing business and we are very optimistic about seizing that opportunity.  We see a lot of interest from China to invest in the UAE. The UAE’s number one trade partner is China, followed by India, Saudi Arabia, Germany and Japan.

As of today, there has been a 16 percent increase in annual trade between UAE and China for imports and exports.There are around 5,000 Chinese companies in the UAE so the Silk Road trade route is about to accelerate massively. Africa also offers huge opportunities for the region. We are looking at Kenya, Mozambique, Morocco, Tanzania and Egypt as target countries for increased trade relations.

Around 95 percent of the nation’s non-oil GDP is generated by SMEs, so by helping to stimulate entrepreneurship we will automatically create a more sustainable economy.

Harnessing vision

As well as education, entrepreneurs also need optimism and vision to succeed. The business people who come out on top tend to be those who see the opportunities in challenges, not the challenges in opportunities.  There is an awful lot of uncertainty globally and worries about geopolitical risk and payments, but entrepreneurs must not lose sight of their dreams. They need to continue to see what others don’t see. They are problem solvers.

Currently, there is a lot of liquidity in the local banks but only 5 per cent is given to SMEs. Great entrepreneurs often have visionary ideas but they don’t have the monetary means to achieve them, so this is exactly where ECI tries to fill the gap. We do this to help the economy.

We all believe in a stronger UAE — we want to the best country in the world — and we want to make it happen fast.