Funding Dubai SMEs: Challenges and Opportunities


No Standard Definition

The commercial sector in the UAE is quite saturated with small firms. A large share of SMEs is active in the trading sector; other important sectors include small-scale workshops, hotels and restaurants as well as contracting. Real estate and its related business activities also constitute a larger share.

It’s important to note that there is no standard definition of what constitutes an SME in the UAE, however, there are three main criteria used to define when a company is considered a small or medium enterprise: the number of employees, the annual turnover and the assets of a company.

Similarly, due to the scarcity of financial company data in the UAE, most public and private bodies dealing with SMEs base their definitions merely on the number of employees.

A worrying trend is the observation that smaller businesses rarely employ the services of external experts to audit their financial activities.

The most important limiting factor to SME lending is the accounting practices of most small companies in the country. An approach which promotes regular audit not only reduces the risk of business failure, but also equips smaller businesses with an understanding of how to develop management practices that enable them to access finance and grasp opportunities while mitigating risk.

Mostly, official data on SMEs do not include many other variables such as profitability, survival rate and turnover, all of which are essential for accessing bank loans. During the 2008-2010 financial crisis, banks significantly reduced their lending (loans and overdrafts) to SMEs in a drive to reduce risk. Post-crisis era, this falling finance trend has continued, as SMEs have largely been strongly restricted in accessing the capital that they need to grow and expand.

“Finance is a key challenge for SMEs, not only in the UAE but also worldwide, as banks are generally reluctant to lend to SMEs due to their lack of audit reports,” quipped Paul Boots.

He noted that the impact of the 2008-2010 financial crisis and the economic downturn that it entailed was substantial on SMEs, saying that “in the post-crisis era, things have not been rosy either, as SMEs in particular have faced challenges in relation to accessing finance.”

The common concerns for the majority of SMEs in the region are related particularlyto gaining access to foreign markets, fear of competition, identifying new customers and dealing with regulation.

Going Beyond Borders

Those were some of the concerns the government is trying to address, as many local SMEs appear to be missing the potential offered by international business.

In order to maximise the benefits of international activity, small business owners need help and advice on finance, risk, regulation and other competitive issues, associated with doing business further afield from your home territory.

“The government is fully aware that for SMEs to thrive, substantial barriers need to be overcome. This is where we come in. We help SMEs in accessing and identifying opportunities and making appropriate contacts in their target markets,” Alexandar Williams added.

Stepping out of comfort zones will be a necessity for all SMEs with real growth ambition.


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