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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
 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
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
Trading
Employees
Micro
< =9
Small
<=35
Medium
<=75
Turnover
Manufacturing
Employees
Turnover
Services
Employees
Turnover
< = AED 9 mln
< =20
&
< = AED 10 mln
< =20
&
< = AED 10 mln
&
<= AED 50 mln
<=100
&
<= AED 100 mln
<=100 &
<= AED 100 mln
&
<= AED 250 mln
<=250 &
<= AED 250 mln
<=250 &
<= AED 250 mln
&
Source: Dubai Chamber based on Dubai SME
Dubai Chamber Members
Over 90% are SMEs
Dubai Chamber Registered Members
200
155+
Members number (000)
180
160
140
120
100
80
60
43
40
20
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014
Source: Dubai Chamber database
Dubai Chamber Members:
Trade Statistics 2013
SME Contribution to Dubai Economy
SMEs contributed on average 40% of Dubai total GDP
Source: Dubai Chamber database
Significance of SME’s to Dubai Economy
Dubai’s SMEs are significantly contributing to Dubai total employment
Source: Dubai Chamber based on Dubai SME
Significance of SME’s to Dubai Economy
Dubai’s SMEs dominate number of establishments
SMEs Contribution to Dubai
Total Number of Establishments
(%)
100%
95%
5%
SMEs
Large
Total
Source: Dubai Chamber based on Dubai SME
UAE SMEs Access to Finance
Actual SMEs lending penetration is very low in most of GCC.
however, target rates are promising
Target SME Lending Penetration
Target SME Loans/Total Loans (%)
50%
44%
45%
40%
35%
30% 29%
30%
24% 25%
25%
20%
15%
10%
31%
15%
12%
9%
9%
11%
6%
5%
0%
Source: Dubai Chamber based on “Bank lending to SMEs in MENA Survey Report, World Bank and Union of Arab Banks, 2010”
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 selffinanced
• SMEs mainly demand bank finance
for:
• 59% working capital
• 37% capital expansion/investment
• 4% short term financing
Source: Dubai Chamber based on Dubai SME
Primary Constraints to SMEs Financing
Supply Side
• Banks remain cautious about lending to SMEs sector due to:
o Lack of credit information on SMEs
o Risky and costly lending to SMEs
o SMEs lack of business and financial skills
o Lack of guarantees or collateral availability
Primary Constraints to SMEs Financing
Demand Side
• Dubai SMEs access to bank finance is constrained due to:
o High transaction and setup costs.
o Unclear borrowing requirements.
o Lack of awareness on being ‘bankable’
o SMEs are offered the most expensive mode of
financing such as the overdraft and the credit line
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
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.
Thank you
Essa Al Zaabi, Senior Vice President
Dubai Chamber
21 May 2014