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EFS Thought Leadership: Shifting Focus on SME’s


UAE strategy focuses on the development of the segment as part of Operation 300bn

In March 2021, the UAE announced the launch of Operation 300bn where the focus was to increase the industrial output of the economy from AED 133bn to AED 300bn in the next 10 years within the country.

It came at the heel of the Dubai 2040 Mega-plan and set a target for the public and private sector to achieve through a dedicated focus of the overall economy. The visionary leaders of UAE see these milestones as key steps towards the continued aspiration to achieve greater heights for the benefit of the UAE nationals, residents and the global community as a whole.

SMEs represent more than 94% of companies in the UAE, employing about 86% of their private-sector workforce. The estimated size of the SME sector was 53% of the UAE economy in 2019 as per the UAE Competitiveness and Statistics Authority.

Traditionally, access to funding has been one of the most significant challenges for the SME sector due to which 40% of the global SMEs have unmet financing needs as per the World Bank. The UAE ranked first in the region and fourth globally in the recently released Global Entrepreneurship Index (GEI) 2020, accelerating from fifth position on the global ranking the previous year.

The announcements over the last week have demonstrated a strong will to address the SME sector as a vital growth segment in view of Operation 300bn.

The first announcement was by the Central Bank of UAE, where it issued new regulations for the licensed financial institutions to set up programs and best practices to deal with small to medium enterprises. Over the past many years, SMEs have had access to various financial sources in the UAE.

However, the SMEs’ survival in the UAE post-covid needed strategic guidance to ensure a robust framework to support the growth strategy. The regulations by the Central Bank of UAE require the strengthening of the financial product designing, promotion, sale and services for the products, responsible financing practices, and the setup of a clear redressal of complaints by the SMEs.

Above all, it requires that the financial institutions have to open bank accounts for SMEs in three working days – a timeline that will provide clarity to new SMEs and much needed support in turnaround times for services.

Following closely to the Central bank’s announcement, the Emirates Development Bank (EDB) announced a Dh30 billion initiative with a significant focus on creating 25,000 jobs in the vital sectors and financing for 13,500 SMEs. As part of the program, there will be a dedicated fund supporting SMEs and startups that need financing and investments, whilst the EDB will also support industries in the vital sectors.

Given the SMEs’ contribution in the UAE economy, it is clear that these measures will play a critical role in further developing the exiting companies and encouraging new SMEs to establish themselves in high-growth sectors.

The COVID19 pandemic raised concerns on SMEs’ viability across the globe, and as the pandemic continues to rage on, the struggle for the SME sector to preserve the cashflows remains a daunting task.

As we approached the end of last week, the UAE Central Bank extended the Dh50 bn financing support for the financial sector till the end of the year 2021 to ensure continued availability of the Targeted Economic Support Scheme (TESS) for the private sector. SMEs are a large part of the private sector economy, the scheme will directly support these businesses’ cashflows, allowing them to focus on their core operations.

The key element now is that the private sector should utilize this opportunity and support measures to ensure that they focus on growth through resilience and transformation.

The vision for the next 10 years has been outlined in favor of SMEs, and these measures by the UAE demonstrate not only their vision but willingness to act towards a new future. These initiatives and existing platforms such as Hub71 in Abu Dhabi have given SMEs a platform with a support system that can help them achieve the growth targets.

Authored by Mr. Taher Jhanjharya – Group Chief Financial Officer, EFS Group 

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