First report on the state of equity investment in SME businesses in Dubai

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The report refers to the slow pace of innovation among SMEs in Dubai even when they have the potential to attract investment and remain growing. The presence of a strong institutional and legal framework to regulate investment activity is essential to improve investor confidence, unlock capital and attract investors, says the report.

“Dubai SME has put in tremendous efforts into this report, which included a complete study of SME investment patterns across the project life cycle, from the establishment phase to expansion, as well as views and challenges related to the prevailing investment landscape. We will work on the recommendations in the report to fill the gaps identified, and promote equity financing, thus creating an environment conducive to SME growth and sustainable development in Dubai,” commented Abdul Baset Al Janahi, CEO of Dubai SME.

Al Janahi said the Dubai SME has identified a number of potential initiatives based on the gaps identified in the report. Key initiatives have also been identified as a means of addressing the gaps mentioned as part of the Dubai SME 2021 Strategic Plan and they will be implemented in collaboration with key stakeholders in the entrepreneurial ecosystem.

“The report has recommended raising awareness about the risks and benefits of investing in start-ups, highlighting SME success stories, facilitating communication between investors and start-ups, and promoting networking among various stakeholders such as business incubators, universities etc, among many others. Other recommendations include enabling investors to evaluate opportunities and SME potential, as well as building entrepreneurial capabilities in sourcing and negotiating investment,” Al Janahi said.

The report calls for robust insolvency and bankruptcy regime for onshore companies in the UAE and exploring the option of a secondary market, which would allow small and mid-sized companies to list without complex regulatory pre-conditions related to corporate governance and accounting. A sponsor-supervised capital market model, which will allow an SME to be brought to list by a sponsor with expertise in corporate finance and regulatory compliance has also been suggested, in addition to allowing SMEs to raise capital up to a certain limit without significant regulatory burden.




The report recommends that there should be international standards to help investors assess the feasibility of business ideas as well as investment options in infrastructure, eco-innovation, including technical centers and centres of excellence in research and development. Absence of authoritative trading benchmarks makes investors apprehensive of investing in business ideas and evaluating risks, says the report.

The report noted that the total value of capital investments in SMEs across Dubai amounted to nearly AED110 million in 2014 and it is expected to grow by 15% in the near term on the back of a 30% growth in the number of deals, driven largely by activity from existing incubators/accelerators and early-stage investment firms.

Additionally, the expected increase in the number of industry-specific incubators and accelerators, triggered by strategic government investments; is likely to further boost a growth of startups within the economy. The UAE, particularly Dubai, has witnessed a lot of foreign interest from business angels in the US and Europe, which presents an opportunity to convert these into active investors, focused on UAE-based businesses.

The Forum also witnessed the signing on a memorandum of understanding between Dubai SME and The European Trade Association for Business Angels (EBAN) to launch joint initiatives, organizing specialised training programmes, and developing specialised capability development programmes, in addition to organising events to connect with international networks within EBAN.

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