Banks should dedicate five times more funding to SMEs, according to the director-general of Dubai’s Chamber of Commerce.
Lenders should reserve around 20 percent of their funds for small companies, if the SME market is to receive the boost that it needs, Hamad Buamim has said.
“We are doing a lot of work with the banks,” he told Arabian Business on the sidelines of a Dubai press conference.
“At the moment around four percent of banks’ total funding goes to SMEs. We want that to be 15 to 20 percent ideally. This is normally the case in other economies. We believe this is better for the banks as it will reduce their exposure to the big players.”
He added that there was often a misperception about the risks of lending to small businesses, which was having a negative impact on bankers’ policies.
“We realised there is [a lack] of understanding about the risks of small businesses, and we’re trying to bridge the gap. Recently we signed a partnership with the National Bank of Abu Dhabi, and they dedicated a $100m fund to small businesses, focusing on the letter of credit and the working capital.”
The Dubai Chamber of Commerce is targeting at least 10,000 new business licenses this year, after recording 10,500 companies in 2010.
According to its most recent survey of SMEs, just 42 percent of businesses are optimistic about the year ahead, with the construction and building industry having the most negative outlook.
Among the main inhibitors for businesses will be access to additional capital and export facilitation, the research said.
Companies said they were also concerned about government fees to businesses, and the costs and procedures involved for obtaining visas.
Buamim said he had been urging the government to extend the length of visas from two years to five, and to differentiate from labourers’ and investors’ visas.
He has also been calling for the government to return visa costs to pre-recession levels after receiving complaints from a number of companies.
“The issues need to be addressed,” he said. “The cost of the visas really went up during the last three to five years. When it was the boom time, it was ok, but right now with all the challenges, this needs to be addressed. It needs to come down to previous levels.”
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