An in-depth analysis of the SME ecosystem in the UAE. The article also attempts to give insights into the comprehensive revival efforts and agile policies put in place by the national government to uplift SMEs from pandemic distress and financial constraints.
Small and medium enterprises (SMEs) are observed as the backbone of all economies across the world. Not only do they have the remarkable potential to lead innovation, create jobs, fuel economic growth, and expand the tax base but also can play a crucial role in social cohesion. However, their existence and survival were facing questions since the COVID-19 pandemic hit. Many of them had to hibernate their operations for an uncertain period due to the disconnection of resources and supply-chain networks, owing to lockdowns in the South Asian countries and Europe.
The United Arab Emirates (UAE), has always been a frontrunner in showing its remarkable potential to host micro, small, and medium-sized enterprises (MSME) in its economy. The “UAE National Agenda,” presented in 2014 leading to the UAE Vision 2021 had categorically explained about creating a “Competitive Knowledge Economy” and signaled the country’s interest to reduce petrochemical dependence.
According to the Ministry of Economy, “SMEs represent 87 percent of the companies in the UAE and constitute 86 percent of the private sector’s workforce.” The sector, combining manufacturing, service, and trade, contributes over 52 percent to UAE’s non-oil GDP.
The Crisis Phase and Revival Efforts
The Central Bank of the UAE (CBUAE) has been actively surveying, studying the MSME sector, and figuring out possible options to help each category of enterprise to recover from challenges and financial constraints. Such surveys are regularly conducted in developed economies and the UAE is seemingly upfront in these actions that potentially enhance opportunities in the business sector.
Reports of CBUAE, chambers of commerce in emirates, various other agencies accelerated the government efforts to protect the SME sector in the extremely turbulent year of 2020. The UAE government’s agility in terms of creating and revising policies was visible enough. Business support, economic stimulus packages, service fee reductions, and utility price reduction combinedly worked to rescue the vulnerable SME sector and the country stood above its counterparts in the GCC.
UAE Ministry of Economy’s Cabinet Resolution 2020 to slash the fees of government services include licensing, renewal, and trademark, Ministry of Human Resources and Emiratization’s financial and administration protection from, and Prime Minister’s “agile, flexible, and speedy government” policy are the notable ones.
Banks for Small and Medium Businesses
The CBUAE survey concluded stating, “The surveys show challenges for MSMEs related to the absence of audited accounts, lack of collateral, in tandem with limited use of the services of the Credit Bureau and credit export insurance, which inhibit companies’ access to finance, thereby revealing areas where reforms are expected to have the biggest impact on improving the UAE MSMEs ecosystem.” The finding of the survey had played a crucial role in the UAE government’s mission to rescue SMEs and instructing banks to start flexible lending and insurance schemes for small and medium-sized businesses.
Acting upon the government’s interest, most of the financial institutions in the UAE created tools that will mitigate their risk connected with SME lending. Leading banks in the country including Emirates NBD, FAB, Mashreq, and RAK, offer business accounts, flexible remittance, digital solutions, financing, and personal services to SMEs.
Insights into SME-specific schemes, policies, and loans in the UAE banks:
Emirates NBD’s SME-Specific Package:
The bank convenes Multaqa that helps SME owners and entrepreneurs hear from industry experts and networks. It had announced a customized business banking package in 2020 for UAE-based SMEs and startups that features preferential pricing and privileges on transactions, working capital, trade finance, FX, and commercial loans, cementing the bank’s commitment to supporting the future growth and development of companies registered to do business with Expo 2020 Dubai.
Mashreq Business Banking
Mashreq offers business account solutions to SMEs include 25-30 percent discounts on trade transaction fees, free online remittance for currency transfers, unlimited checkbooks, business debit cards, flexible deposits, and tailored services for selected businesses besides sophisticated digital banking services.
RAKstarter SME Account
For budding entrepreneurs and startups, RAK bank provides zero-balance business accounts. RAKstarter accounts are available in AED, US Dollars, Euro, and Pound Sterling (GBP) currencies. The bank also claimed to provide business financing and attractive foreign exchange rates. Businesses own accounts at RAK bank can also avail low-cost mobile POS machine at preferential pricing.
FAB’s SME Growth Loans
After the announcement of Abu Dhabi government on expanding the SME Credit Guarantee scheme to prioritize and increase SME’s access to financing in the Emirate, First Abu Dhabi Bank (FAB) started to provide easy financing options to SMEs, improving their ability to withstand market fluctuations.
SME Growth Loan benefits from FAB
- Working capital facility for three months duration
- Term loans of up to 4 years duration
- Competitive interest rates
- Easy documentation
- Quick turnaround time
All qualified SMEs registered as LLC, FZEs, Sole Proprietorship, Partnerships & Branches of foreign companies, and operating in Abu Dhabi (onshore and offshore) in the categories of trading, manufacturing, and services are entitled to get the loan benefits.
Robust Technology Solutions for SMEs
SMEs need the support of cutting-edge technology in their business environment. The presence of sophisticated hardware and competent software not only make customer engagement highly productive but also save process cost. A well-thought-out plan should be made before procuring technology solutions of any kind.
The unprecedented pandemic hit led companies to start hybrid work, where a large percent of the workforce does their job remotely. Similarly, virtual interactions, even on business levels, have become a common practice. Hence, the IT solutions providers started tailoring their products based on the need of businesses. The integration of AI, cloud computing, cyber security, remote work solutions, and customer engagement tools is essential for SMEs to strive for success.
When it comes to procuring hardware solutions, SMEs should rely on robust and sturdy solutions to reduce down the situation and following business impact. The cost could be a major factor in the selection of hardware resources; however, reliability shouldn’t be questioned. Both open and closed sources have solid software programs to handle the entire enterprise activities. No matter what, adequate technical, installation, and training support should be demanded when it comes to choosing a vendor or system integrator.
Here’s a list of a few solutions that SMEs should go for or strengthen to become competent in the market:
- Supply and Logistics
- Workforce Management
- Cloud and Cyber Security
- Data Collection and Analytics
SMEs’ Reliance on Logistic Services
Nearly 70 percent of the UAE enterprises, mostly SMEs, trade their goods globally than locally. The ongoing digitization of logistic and supply-chain operations on par with the evolution of supporting technologies level the playing field for them. In addition, the geographical placement of the country added advantage for businesses to reach nearly half of the world population. The transformative growth and burgeoning investments in the e-commerce sector also seeding new hopes.
Here are some of the logistic options that businesses can choose from.
Road freight: It is one of the traditionally competitive logistic segments and it has a well-maintained infrastructure in the UAE. However, it required more efficiency and better technological support
Air freight: Most SMEs rely on air freight services, through which goods can travel almost two-thirds of the world population in eight hours from the UAE
Sea freight: For transporting heavy and large quantities of goods, sea freight becomes the only option.
Including several home-grown ones, there is a large number of logistics and shipping companies, DP World, Tristar Logistics, DSV, FedEx, DHL, Aramex, and Fetchr to name a few, operate in the UAE with tailored services for SMEs. Most of them offer road, air, and sea freight services.
To conclude, the COVID-19 pandemic had a lot of lessons for the SME ecosystem that includes enterprises, solutions providers, financial institutions, and logistic companies. All of these sectors consistently need to exchange values for common good. Existence in these sorts of turbulent times is possible only when effective integration and communication happen!