Opening a bank account for UAE startups can take up to three months making it difficult to begin commercial operations, according to the survey by Dubai Chamber and Ministry of Economy
Almost two thirds (65 percent) of UAE entrepreneurs believe that banking is the biggest challenge they face at the start of their business, according to a study by Dubai Chamber of Commerce and Industry (Dubai Chamber) and the UAE Ministry of Economy.
Opening a bank account for startups can take up to three months making it difficult to begin commercial operations, according to the study from the Council of Small and Medium-Sized Enterprises and global consultancy firm Roland Berger.
Also cited as challenges were the difficulty of banking procedures due to insufficient guidance, lack of clarity, and a complex documentation and verification process.
Financing the business came in as the number two highest concern, with 61 percent of respondents citing this as their main challenge. A lack of affordable office space was third at 53 percent.
Dubai Chamber’s study outlined two main factors for the banking issues. First, the pressure on banks to comply with increasingly stringent regulatory standards to combat illegal activities; and second, their sense that emerging companies are not as commercially attractive as other customer segments due to low initial business volume associated with the ability of few startups to survive and expand.
To facilitate emerging companies’ access to banking services, its recommendations include the provision of basic bank accounts that meet the necessary needs of emerging companies (such as accounts that set a limit on transaction amounts or allow for local transfers only), simple and transparent guidelines on procedures, and the provision of well-trained and experienced bankers.
The study also urged the adoption of technology to improve banking operations and reduce their costs. It suggested that this transformation could lead to a major change in client experience and stimulate joint efforts from key stakeholders, such as commercial banks, the Central Bank and business licensing authorities.
From the banks’ perspective, some of the challenges faced by entrepreneurs are self-induced. The banking sector highlighted a lack of awareness from the start-ups on the basic requirements as a major cause for delays.
Included among its conclusions, the report said while banks have an obligation to adhere to regulatory requirements, they should aim to do better in terms of emerging-business banking procedures and help build a system that helps foster innovation.
Regulators, such as the Central Bank, it said, can play a role in providing additional guidance to banks on the appropriate balance to be achieved in terms of customer search.