SME Banking Outlook from NBF: UAE SMEs can flourish with sound financial advice

Rehan Ali, the Head of Business Banking for National Bank of Fujairah, provides his outlook on the future of SME banking in the UAE and how NBF is helping to close the funding gap.


By Rehan Ali, Head of Business Banking, National Bank of Fujairah

Small and Medium Enterprises are the most significant contributors to the economy as they represent almost 94% total number of companies operating in the country and providing jobs for roughly 80 per cent of the private workforce.

The ease of doing business and competitiveness are two of the leading characteristics that set the UAE apart from other markets and continue to incentivize business owners to set up operations with the promise of vast, profitable opportunities.

With a clear vision to diversify the economy and build sustainable national development plans, the government has identified SMEs as key to ensuring economic growth, innovation and job creation. As such, the UAE government has been consistently reiterating its commitment to supporting the sector and creating an environment where entrepreneurship spirit can flourish.

However there are still some challenges which are faced by the SME’s during their life cycle regardless of the size, industry or business sector. As a result, business objectives, priorities and strategies will change as they evolve. In the early days, the majority of entrepreneurs used to rely exclusively on instinctive decision-making to face their challenges, however the situation has changed given the changing market dynamics. The most important aspect is having access to sound financial advice which is a key critical factor to help secure business success as market conditions evolve, regulatory frameworks change, and ability to adapt to new technologies as they emerge, latest being AI.

Closing the funding gap

SMEs have been the backbone of current economic development of UAE contributing 60% of the GDP, as quoted by UAE Ministry of Economy.

Apart from the initial costs of setting up the business, SMEs are faced with various other challenges which include finding quality talent with limited resources, skepticism, governance and most importantly identifying financing solutions that are right for their business model. In UAE, the government has been pressing on efforts to promote SMEs and increase their appeal to banks and lending institutions. The reality is that businesses are not set up to fail, they can flourish and grow with the right people, market knowledge and financial advice.

One of the biggest challenges we see for companies that are starting out is that they lack knowledge about the range of financing services available and how these products can help their businesses grow.

Historically, lenders haven’t proven to be forthcoming when it comes to lending to new entities which cannot present a two/three-year financial history. These are, then, left to manage their operations and growth without any external funding or support.

Since, our inception more than three decades ago, the evolution of our business has long mirrored the clients’ needs as to enable them to run their business successfully. Regarded as the partner for businesses in the UAE, we provide today an array of innovative banking solutions to the SME segment including but not limited to SME lending, treasury solutions, transaction banking, parameterized and custom-made solutions to meet the dynamic requirements of SMEs in the competitive market conditions.

NBF with its dedicated SME segment is very much focused and committed to support this important segment of the economy. With lending to SMEs being one of our core business pillars, NBF is seeing stress subsiding for the sector with more opportunities to close the funding gap and support the sector through a consistent approach. Given our expertise and years of experience in this sector, the bank has continued with lending to SMEs when several other banks stopped financing or consolidated their exposure to SME segment due to high NPLs and losses.

Opportunities in the horizon

UAE banks are now increasingly sensitized to the challenges faced by SMEs and have realigned themselves to their needs. Not only do they want to ensure long-term profitability of SMEs, but also add value to their business. Banks are now keen to provide extra support to enterprising, honest business persons and focus on the needs to hand-hold innovative and enterprising business owners. With greater communication and sensitivity to each other’s needs, we in the banking sector can play a vital role in guidance, training and education of entrepreneurs, so that these common goals can be achieved.

In terms of progress, Central Bank of the UAE is now working on initiatives to help smaller businesses get access to fresh funding at more accessible rates. It is coordinating with the UAE Banking Federation for the revision of rules and operating procedures for lenders dealing with the small companies. Recently UBF has issued a guide book for SMEs which should be useful to them. In addition, Emirates Development Bank (EDB) is allocating about Dh1 billion to fund small and medium-sized enterprises run by Emirati entrepreneurs this year and next. They plan to allocate Dh450 millions of its Dh1bn budget in 2018 alone to support the country’s SME sector.

With this positive outlook, the UAE government and Central Bank accord high policy priority to this segment and are keen to boost its contribution to 70 per cent of the national economy by 2021.

While this takes shape, entrepreneurs have key events and initiatives to look forward to. Looking back, the Expo 2020 announcement had created great excitement amongst the growing SME community, setting the pace for more opportunities, growth and business development in UAE.

The economic diversification policy outlines the country’s commitment to creating revenue streams from non-oil sector and reduce the perceived dependency of oil and gas sector. This gives opportunities to SMEs to come forward and contribute, encourage entrepreneurial spirit to emerge amongst the younger generation, as well as provides lenders with the promise of upcoming growth from the SME sector.

In addition, the Dubai Future Accelerators Initiative is aimed at creating Dubai as innovation hub, which pairs government departments with innovative companies to find solutions to the various challenges faced in this century. Technology SMEs and innovators can make use of this opportunity to showcase their skills on the global platform and make a niche for themselves. With technology being an ever-evolving, the opportunities for growth are exponential.  

NBF has always been walking the extra mile to help businesses that have passed the start-up stage and needing support to achieve the growth in variety of ways, more than just providing financing. Most importantly NBF has been more proactive in supporting how the business is being conducted and extending efforts to resolve the challenges faced by businesses. The long-term strategy for NBF is to grow its SME portfolio prudently by striking a careful balance between supporting existing client relationships that we know well and trust and cultivating new ones in line with central bank goals. NBF is the first bank to have partnered as Platinum sponsor of Thomson Reuters Accelerate SME digital platform which is a complete eco system built to support the SMEs in UAE.

© Press Release 2018

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© Accelerate SME 2018

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