Initiative meant to ensure funding for national SMEs
HE Younis Haji Al Khouri, Undersecretary of the Ministry of Finance (MoF) has announced that the Ministry is currently studying the possibility of setting up an organization to keep records of mortgages of capital assets to ensure funding for national small and medium enterprises.
HE Al Khouri explained that studies pertaining to this project have been in progress since the beginning of this year, in line with the decisions announced by the UAE cabinet. MoF had created a committee to follow up on the research progress which includes members form the Ministry of Economy and the Central Bank of the UAE, and other specialized parties.
MoF’s current studies are due to its commitment to alleviating all financial challenges facing national small and medium enterprises. These include lack of funding options, the reluctance of banks to accept credit requests, difficulty in obtaining funding from banks, and other obstacles which are a direct result of the inability of new businesses to utilize their capital assets as guarantees due to the lack of a special entity to register these assets.
HE Al Khouri went on to add that there were many benefits for establishing a specialized record for mortgages of capital assets, such as providing more financing options and lowering interest on small and medium investments. This will allow new businesses to use their assets as guarantees and to receive funding.
HE Al Khouri stated that there were many conditions that need to be taken into consideration when mortgaging capital assets. He added that there had to be a wide range of rights pertaining to these assets, such as the guarantee of tangible and intangible assets in the present and the future, including their products and returns, in addition to allowing all capable natural and legal persons of applying these rights. It should also aid in finding property rights to pay back obligations.
HE Al Khouri also emphasized the importance of guaranteeing security principles for capital assets so as to determine the order on competing claims for guarantees, in addition to putting policies in place to ensure that relevant laws do not contradict. HE also indicated that it was important to share all details of court cases pertaining to transferable properties to ensure transparency between all three parties. He said that it was not enough to make announcements via public records only, but also through creditors, possession or control of the creditor or agent of the creditor.
In order to properly implement this initiative in the UAE, there are a number of issues that need be in place, according to HE Al Khouri. These include the determination of specific guarantees that do not include future assets in addition to clarifying implementation mechanisms that might require adjustments in the future. This will ensure that the system is transparent and fair, and that it guarantees equal opportunities for all competing benefits, including government privileges and offers a central record for providing transparency guarantees.
Furthermore, the initiative should provide accurate information, allow for quick registration and searches, provide easy access of information at all times, and limit the possibility of errors. It should also be cost efficient where fees cover operation costs without resulting in profit for the government.
HE Al Khouri also confirmed that the committee concerned with studying this project has researched the best practices applied globally regarding issues such as obtaining credit and guarantee ratings that were received by capital organizations. He also indicated that applying this project requires 18-24 months on average.
Studies for this initiative are currently underway, but still require strong efforts from both MoF and the special committee. A number of aspects have yet to be finalized, such as determining project cost, legalities, IT and programming, organizing training workshops on the new system, in addition to a number of other practical issues.