The UAE is moving forward in creating a positive ecosystem for SMEs and to promote entrepreneurship among UAE nationals. I all know that a law for SMEs was passed in the UAE and the good point is that enhancements keep on adding to it. The latest was Sheikh Mohammed bin Rashid, Vice President and Ruler of Dubai, issued amendments to the law on Dubai SME to help develop the sector. One of the changes relates to Emiratis. It states all entities owned by the Government of Dubai, or in which it has ownership of more than 25 per cent, are committed to exempting Emirati entrepreneurs from any registration fees for being a preferred supplier and allocating 10 per cent of purchases to Emiratis.
This is something that will help give small businesses regognition by large companies and will alleviate some of the financial burdens of the start of any business.
These steps are very important as they help build the ecosystem by giving a space to smaller businesses and will also contribute to changing the mindset for private sector large corporations to sign contracts with new, disruptive companies. This is key to creating a proper ecosystem.
Yet, if we mention this positive step by the UAE government, one has to ask how should banks help. It is as we all know difficult to get a loan as a new business. Therefore, in the same way banks should have programs to finance SMEs. This could go along with guidance and management services in order to help these SMEs grow properly.
There must be a way to open the capital markets to small companies and contribute to the growth. Financing of start-ups shouldn’t be 100% equity or convertible bonds of private investors; the banking sector has to play a bigger role in supporting SMEs. This could be done through their CSR programs and experimented on a small sample to look into the defaults levels and general working conditions. I am sure the banking sector will have positive surprise, as a proof we all know that the level of repayment on micro credits is close to 100% despite usually high interest rates. Also, any entrepreneur who would get this support from his bank would stay loyal once his needs become larger as his business expands so the bank would be creating a flow of future business. In any case, it is high time large banks look into this sector especially because young entrepreneurs deserve this commitment.
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