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
Micro
Small
Medium
Trading Manufacturing Services
Employees Turnover
< =9 & < = AED 9 mln
<=35 & <= AED 50 mln
<=75 & <= AED 250 mln
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
Source: Dubai Chamber based on Dubai SME
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:
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
12. 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
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
Notas del editor
The number Dubai Chambers members registration has increased over time from 43 thousand member in 2000 to 173.9 thousand registered members.
Registering Cumulative Annual growth rate of about 11.3% over the period 2000-2012.
If up to Q1-2013 members registration is considered then we have CAGR of about 11.7%.
98% of Dubai chamber registered members are SMEs.
SMEs have contributed about 40% of Dubai total GDP.
GDP of Dubai SMEs is 47% coming from trading SMES, 41% from SMEs in services, and 13% from manufacturing SMEs.
SME’s contribute 42% of Dubai total employment.
Out of this 42%, Micro SMEs contributed 14.6%, Small SMEs 16%, and Medium 11%.