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SME mart needs Dh6b of fresh credit

Tuesday, Dec 25, 2012

Abu Dhabi: The UAE’s small and medium sized enterprises (SMEs) need access to more credit for 2013. Only 4 per cent of bank lending goes to SMEs as it stands, said Steve Willams, Group Chief Executive Officer at Gulf Finance Corporation , a wholly owned subsidiary of Shuaa Cpital.

“The UAE’s SME market requires more than Dh6 billion worth of new credit in 2013. We at Gulf Finance aim to fulfill more than 10 per cent of that credit requirement. We have lent more than one billion dirhams to the UAE’s SMEs during the last three years, and we aim to grow that amount three-fold in the next three years,” Williams said. He commended the UAE’s Cabinet approval of a law pertaining to SMEs last week, which stipulates that for all institutions, companies and agencies that the government holds a 50 per cent stake of, or more, shall allocate 5 per cent of their budget for goods and services to SMEs that offer competitive pricing and quality.

“Private Small and Medium sized Enterprises (SMEs) typically account for more than 95 per cent of all businesses. They also constitute a major source of employment and generate significant domestic and export earnings in transition and developing countries,” said Williams.

According to the Organisation for Economic Cooperation and Development (OECD), SMEs contribute to over 55 per cent of the Gross Domestic Product (GDP) and over 65 per cent of total employment in high-income countries.

SMEs and informal enterprises account for over 60 per cent of GDP and over 70 per cent of total employment in low-income countries, while they contribute over 95 per cent of total employment and about 7 per cent of GDP in middle-income countries, OECD stated. Wiliams added that Shuaa Capital has provided its subsidiary Gulf Finance with Dh460 million that has been deployed to offer funding to SMEs in the UAE. “In 2013, Shuaa intends to deploy two-thirds of its balance sheet towards credit opportunities that include the SME market to a large extent,” added Williams. SMEs, which contribute 40 per cent of the country’s gross domestic product and represent over 85 per cent of all businesses, “There are lots of very good medium-size businesses in UAE which could have gone international and become larger had credit been available to them.”

According to a Dun and Bradstreet report, almost 55 per cent of the UAE’s SME borrowers required banking services for their letters of credit, the most commonly used product. Unsecured loans, the report added, were used by only 13 per cent, an indication of limited availability of unsecured credit to the sector at the time. Abdul Baset Al Janahi, COO of Dubai SME, said national entrepreneurs interact successfully with local businesses, sharing innovative ideas and pushing the envelope for a more productive local economy.

“Recent statistics show that SME loans in the UAE are at around 4 per cent of total bank loans, higher than most [Gulf Cooperation Council] countries, but low when compared to developed countries where SME loans are at over 15 per cent of total bank loans,” the report said, which sees in the low ratio a potential for growth in SME financing in the coming years.

By Shehab Al Makahleh Staff Reporter

Gulf News 2012. All rights reserved.

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