Font Size

- Aa +

Tue 17 Nov 2015 10:49 AM

Font Size

- Aa +

UAE crowdfunding website reports $6.8m of funding to SMEs in 2015

Beehive report identifies lack of funding as a major barrier to growth of SMEs

UAE crowdfunding website reports $6.8m of funding to SMEs in 2015
Craig Moore, founder and CEO of Beehive

One of the UAE’s newest small-to-medium enterprise (SME) funding platforms has helped channel AED25 million ($6.8 million) of funding to 48 SMEs in the 12 months since it launched, it announced on Tuesday.

Beehive is a type of crowdfunding website that links UAE-based SMEs with approved prospective investors that choose which venture they wish to support.

The website has more than 2,600 registered investors, it said on Tuesday, which have together pumped AED20 million of loan or grant funding into 48 SMEs.

The average investment amount is AED55,000, Beehive said. There have been zero defaults and seven SMEs have applied for a second round of funding in their first year, it added.

To mark its first anniversary – which falls during UAE ‘Innovation Week’ this week – Beehive on Tuesday published a research whitepaper highlighting the main challenges entrepreneurs face in starting businesses in the UAE.

It said just over half (51 percent) of respondents to a survey of around 100 SMEs it conducted in association with Thomson Reuters reported that finance was a “major enabler” of innovation and growth, and lack of funding was a major barrier.

The Spotlight on SME innovation whitepaper also found that the government can play a significant role in encouraging SME innovation, for example, by establishing free zone business hubs, business-friendly legislation and investing in university courses related to entrepreneurship and specialist innovation labs – which are soon to launch in the UAE, it added.

The report also noted that while the majority of innovation in the UAE comes from taking existing ideas and making them better, the most important thing SMEs must do to drive innovation is to invest in “structured innovation strategies” across all areas of their business.

Craig Moore, founder and CEO of Beehive, said: “Being an SME in the UAE is a difficult feat. You are competing against large organisations in a saturated market, and you need to stand out and differentiate in order to succeed.

“In our Spotlight on SME innovation whitepaper, we have spoken to SMEs across the UAE to find out what innovation means to them and their businesses, and what drives them to innovate.

“We found that the most successful SMEs in the UAE were the most innovative, whether this meant taking an existing idea and applying it to a new market, or overcoming unaccommodating regulations.

“Our most interesting finding was that a lack of funding to invest in innovation is a big barrier, with 51 percent of respondents highlighting finance as a major enabler to innovation.”

Reuters reported on Monday that SME owners fled the UAE with unpaid debts exceeding $1 billion this year, highlighting that the sector is finding access to finance challenging.

Over the past year, Beehive has completed two full payments cycles and launched an invoice finance product aimed at bridging the gap between payments, and a secondary market for peer-to-peer loans so investors can sell or buy post-funding.

Beehive has also launched a Sharia-compliant investment platform in April, following a review by the Shariyah Review Bureau.

Investors can join Beehive by setting up an account with only AED1,000 and are able to invest from as little as AED100 into SME businesses listed on the platform.

Beehive forms part of wider efforts across the UAE – and by the UAE government specifically – to stimulate the growth of the SME sector and help develop a knowledge-based economy in the country.

During UAE Innovation Week this week, minister of economy Sultan bin Saeed Al Mansouri announced the country’s intention to invest $18 billion in becoming a knowledge-based economy by 2021, reported Khaleej Times.

He did not disclose full details of how it would achieve this goal, but highlighted that the government has removed rules and regulations that were perceived to be hindering the growth of the SME sector, and was drawing up a fuller strategy for encouraging entrepreneurship.

For all the latest banking and finance news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.