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Dubai SMEs Issues & Challenges

Dubai SMEs Issues & Challenges. Essa Al Zaabi, Senior Vice President Dubai Chamber 21 May 2014. Dubai SME Environment. Business friendly environment for business startup and growth UAE top ranks on global indices: Ease of Doing Business Global Competitiveness Index

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Dubai SMEs Issues & Challenges

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  1. Dubai SMEs Issues & Challenges Essa Al Zaabi, Senior Vice President Dubai Chamber 21 May 2014

  2. Dubai SME Environment • Business friendly environment for business startup and growth • UAE top ranks on global indices: • Ease of Doing Business • Global Competitiveness Index • Trade Facilitation Index • Logistics Performance Index • Dubai SMEs is a strategic segment of Dubai’s economy • Access to finance is a key constraint to SMEs globally

  3. Definition of Dubai SMEs • No official definition of SMEs in UAE • Dubai SME defined SMEs across 3 main economic sectors by employment size and turnover Manufacturing Services Trading Employees Turnover < =20 & < = AED 10 mln <=100 & <= AED 100 mln <=250 & <= AED 250 mln Employees Turnover < =20 & < = AED 10 mln <=100 & <= AED 100 mln <=250 & <= AED 250 mln Employees Turnover < =9 & < = AED 9 mln <=35 & <= AED 50 mln <=75 & <= AED 250 mln Micro Small Medium Source: Dubai Chamber based on Dubai SME

  4. Dubai Chamber Members Over 90% are SMEs Source: Dubai Chamber database

  5. Dubai Chamber Members:Trade Statistics 2013

  6. SME Contribution to Dubai Economy SMEs contributed on average 40% of Dubai total GDP Source: Dubai Chamber database

  7. Significance of SME’s to Dubai Economy Dubai’s SMEs are significantly contributing to Dubai total employment Source: Dubai Chamber based on Dubai SME

  8. Significance of SME’s to Dubai Economy Dubai’s SMEs dominate number of establishments Source: Dubai Chamber based on Dubai SME

  9. UAE SMEs Access to Finance Actual SMEs lending penetration is very low in most of GCC. however, target rates are promising Source: Dubai Chamber based on “Bank lending to SMEs in MENA Survey Report, World Bank and Union of Arab Banks, 2010”

  10. UAE SMEs Access to Finance • Access to finance remains a key constraint • Private equity and venture capital are not mature options for SME finance • 77% of Dubai SME’s have no access to bank lending • 80% of Dubai start-ups are self-financed • SMEs mainly demand bank finance for: • 59% working capital • 37% capital expansion/investment • 4% short term financing Source: Dubai Chamber based on Dubai SME

  11. Primary Constraints to SMEs Financing • Supply Side • Banks remain cautious about lending to SMEs sector due to: • Lack of credit information on SMEs • Risky and costly lending to SMEs • SMEs lack of business and financial skills • Lack of guarantees or collateral availability

  12. Primary Constraints to SMEs Financing • Demand Side • Dubai SMEs access to bank finance is constrained due to: • High transaction and setup costs. • Unclear borrowing requirements. • Lack of awareness on being ‘bankable’ • SMEs are offered the most expensive mode of financing such as the overdraft and the credit line

  13. Challenges and Way Forward • Financing is still a major constraint for SMEs in Dubai and UAE • Larger share of SMEs in a bank’s lending portfolio is expected to enhance banks‘ returns and is necessary to diversify risk • Dubai Chamber has always supported SMEs with financial and non-financial issues • Our dedicated business support unit has SMEs training programs, credit rating and events organization to support segment growth • Dubai Chamber has launched Tejar Dubai Initiative to support and train young local Dubai entrepreneurs

  14. Enhancing Dubai SMEs access to finance through: • Inclusive banking services for SMEs: • Provide incentives for banks to lend to SMEs. • Upgrading banking officers skills for improved ME’s credit evaluation • Broadening financial infrastructure base: • Launching credit bureaus and credit rating agencies to improved SMEs transparency • Alternate funding options: • Private equity • Crowd funding • Training: • Designing and launching training programs with banks for SMEs on how to become more bankable.

  15. Thank you Essa Al Zaabi, Senior Vice President Dubai Chamber 21 May 2014

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