By James Eugene

Small and Medium Enterprises (SMEs) in the UAE need better access to financing initiatives and more funds should be available for the sector, according to a senior official.

In an interview with Gulf News, Mohammad H. Al Mulhairi, the Director General of the Abu Dhabi Chamber of Commerce and Industry (ADCCI), said that due to high interest rates “it is almost impossible for SMEs, especially start-ups, to get bank loans,” and that his chamber is “urging bank in Abu Dhabi and across the UAE to consider SMEs to get right financing options”.

His comments come at a time when the UAE have been rolling out new laws and regulatory reform in the country, including a bankruptcy law to aid indebted SMEs. It has been reported that many small business owners have fled the country in fear of being criminalised in the event that they cannot pay their debts, which totaled almost Dh 5bn ($1.36bn) last year. The law is expected to come into effect before the end of the year. UAE banks have bailed out 1,700 SMEs and restructured Dh 7bn ($1.5bn) worth of debt.

Around 94% of businesses in the UAE are SMEs, with the sector contributing over 60% of the country’s gross domestic product (GDP). This figure can be compared to the UAE’s neighbouring Gulf nations, such as Saudi Arabia (33% of GDP), Qatar (16%) and Kuwait (3%). Al Mulhairi has acknowledged that SMEs play an important role in economic diversification in Abu Dhabi, with a knock-on effect on the rest of the country.

Despite the positive numbers, the UAE is currently facing a problem of the country’s SMEs not taking out insurance cover, putting their assets at risk, according to financial advisory firm Nexus Group. This has been attributed to “lack of awareness and insufficient understanding of the significant benefits of asset protection”, head of Nexus’ General Insurance Phil Ashkuri comments. More information on the advantages of taking out insurance are necessary in order to boost the uptake in cover.

Other Gulf nations have also decided to diversify their economies away from oil by focusing on their SME sector. For example, Saudi Arabia have recently approved plans to launch a $1.1bn venture capital fund to help small businesses; while Fadi Ghandour, Aramex co-founder, is seeking to invest in more Gulf start-ups.