The UAE government has said that some small and medium-sized enterprises in the country will no longer require a bank guarantee to continue their operations from the beginning of October.
Smaller firms in the UAE typically require bank guarantees in order to sign contracts with suppliers or larger companies, a process that requires money to be frozen against the transaction.
In a statement, the country’s minister of human resources and Emiratisation, Saqr Ghobash, said that the move would apply to all SMEs either owned by an Emirati or with an Emirati director.
The exemption will also apply if that Emirati runs or partners in a maximum of five companies.
In order to qualify for the exemption, the company will also need to be a member of the Youth Project Development Organisation.
"Following our partnership with the SME Board, the ministry decided to support SMEs for playing a vital role in our national economy, the decision is considered a major step towards reaching a competitive knowledge-based economy that revolves around young Emirati talents," Ghobash said, in a statement carried by state news agency WAM.
"The decree came in line with the on-going future government strategy which appreciates the empowerment of citizens in the labour market to enhance its productivity."
Any company that fails to pay its workers for two consecutive months will have the exemption removed, the ministry statement said.
The move is the latest step to try to support the SME sector in the UAE, where many small businesses are struggling with debt after the fall in the oil price and a slowing economy have hit their balance sheets.
Earlier this year, the country’s banks clubbed together allow SMEs owing debt to more than one bank to arrange for suspended payments, and restructured loans.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.
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