Dubai SMEs
Issues & Challenges
Essa Al Zaabi, Senior Vice President
Dubai Chamber
21 May 2014
• Business friendly environment for business startup and growth
• UAE top ranks on global indices: Ease of Doing Business
Global Competitiveness Index
Trade Facilitation Index
Logistics Performance Index
• Dubai SMEs is a strategic segment of Dubai’s economy
• Access to finance is a key constraint to SMEs globally
Dubai SME Environment
• No official definition of SMEs in UAE
• Dubai SME defined SMEs across 3 main economic sectors by employment size and turnover
Micro
Small
Medium
Employees Turnover
< =9 & < = AED 9 mln
<=35 & <= AED 50 mln
<=75 & <= AED 250 mln
Employees Turnover
< =20 & < = AED 10 mln
<=100 & <= AED 100 mln
<=250 & <= AED 250 mln
Employees Turnover
< =20 & < = AED 10 mln
<=100 & <= AED 100 mln
<=250 & <= AED 250 mln
Source: Dubai Chamber based on Dubai SME
Definition of Dubai SMEs
Trading Manufacturing Services
Over 90% are SMEs
Source: Dubai Chamber database
Dubai Chamber Members
Dubai Chamber Members: Trade Statistics 2013
SME Contribution to Dubai EconomySMEs contributed on average 40% of Dubai total GDP
Source: Dubai Chamber database
Significance of SME’s to Dubai Economy
Dubai’s SMEs are significantly contributing to Dubai total employment
Source: Dubai Chamber based on Dubai SME
Significance of SME’s to Dubai Economy
Dubai’s SMEs dominate number of establishments
Source: Dubai Chamber based on Dubai SME
Actual SMEs lending penetration is very low in most of GCC. however, target rates are promising
Source: Dubai Chamber based on “Bank lending to SMEs in MENA Survey Report, World Bank and Union of Arab Banks, 2010”
UAE SMEs Access to Finance
• Access to finance remains a key constraint
• Private equity and venture capital are not mature options for SME finance
• 77% of Dubai SME’s have no access to bank lending
• 80% of Dubai start-ups are self-financed
• SMEs mainly demand bank finance for:
• 59% working capital
• 37% capital expansion/investment
• 4% short term financing
UAE SMEs Access to Finance
Source: Dubai Chamber based on Dubai SME
Supply Side•Banks remain cautious about lending to SMEs sector due to:
o Lack of credit information on SMEs
o Risky and costly lending to SMEs
o SMEs lack of business and financial skills
o Lack of guarantees or collateral availability
Primary Constraints to SMEs Financing
Demand Side•Dubai SMEs access to bank finance is constrained due to:
o High transaction and setup costs.
o Unclear borrowing requirements.
o Lack of awareness on being ‘bankable’
o SMEs are offered the most expensive mode of financing such as the overdraft and the credit line
Primary Constraints to SMEs Financing
• Financing is still a major constraint for SMEs in Dubai and UAE
• Larger share of SMEs in a bank’s lending portfolio is expected to enhance banks‘ returns and is necessary to diversify risk
• Dubai Chamber has always supported SMEs with financial and non-financial issues
• Our dedicated business support unit has SMEs training programs, credit rating and events organization to support segment growth
• Dubai Chamber has launched Tejar Dubai Initiative to support and train young local Dubai entrepreneurs
Challenges and Way Forward
Inclusive banking services for SMEs:
Provide incentives for banks to lend to SMEs.
Upgrading banking officers skills for improved ME’s credit evaluation
Broadening financial infrastructure base:
Launching credit bureaus and credit rating agencies to improved SMEs transparency
Alternate funding options:
Private equity
Crowd funding
Training:
Designing and launching training programs with banks for SMEs on
how to become more bankable.
Enhancing Dubai SMEs access to finance through:
Thank you
Essa Al Zaabi, Senior Vice President
Dubai Chamber
21 May 2014
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