SMEs and their impact on the economy

In Dubai, the small and medium-sized enterprises, also known as the SMEs, account for more than 90 percent of private companies and contribute nearly 40 percent to the city’s GDP. The SMEs make up 60 percent of the UAE’s non-oil GDP and the Government of UAE is keen to increase the figure to 70 percent by 2021.The SMEs are not only considered the leading force behind Dubai’s economic growth but account for more than 42 percent of its workforce. However, with much to its favor – the SMEs faces various challenges.

Photo May 22, 22 20 29

The main obstacle that comes their way is the lack of financial options especially securing a loan at a reasonable rate. bank rejection rate for a small to the medium-sized enterprise is between 50 to 70 percent.

Sultan Al Mansouri, the UAE’s Minister of Economy also agrees that there is still room for growth in the loan to SMEs. Even due to its contribution to the UAE economy, the sector has been underserved. “Loans approved by the banks of UAE to SMEs make up 3.8 percent of the total loans portfolio – that does not measure up to the importance of the sector to the UAE economy”, he said when speaking to the 6th UAE Conference on SMEs and Innovation. The event, recently held in Dubai was organized by the Ministry of Economics.

The government is playing its part to support the SMEs and help them overcome the obstacles that they face. In fact, the government of Dubai has established a body to support the sector – Dubai SME. Due to their efforts, many financiers are beginning to realize the potential the SMEs hold especially for the economy. The institution along with the Shuaa Capital regularly holds educational seminars to the leading 100 SMEs in Dubai. This also helps the SMEs gain a better insight of their values and makes them more prepared to hold the investor’s interest.

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At another event hosted by the advisory firm AlixPartners and Hawkamah, the Institute for Corporate Governance also agreed that the issues of SMEs should be addressed as a priority and new sources of capital should be formed.

These are just some of the steps taken in the direction to help the SME sector live up to the opportunity it encompasses. If the SMEs thrive, the whole UAE economy will reap the rewards!

References:

http://m.thenational.ae/business/economy/uae-economy-minister-unworried-by-natural-level-of-sme-loan-defaults

http://m.gulfnews.com/uae-smes-form-backbone-of-nation-s-economy-1.1162522

http://saudigazette.com.sa/business/smes-play-critical-role-uaes-economy/

 

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