The challenge of financing small and medium-sized enterprises (SMEs) is not unique to the United Arab Emirates. However, the UAE does have a relatively poor track record of bank funding for these businesses compared to regional and global norms. Data from the International Finance Corporation indicates that about 4% of system-wide bank loans in the UAE are allocated towards SMEs. Though this far better than the Gulf Co-operation Council average of 2%, it is well below the wider Middle East and north Africa figure of 8%. In the advanced economies of the Organisation for Economic Cooperation and Development this number rises to 22%.
For its part, the UAE government is working hard to address the problem. New regulatory measures introduced over the past few years, including a bankruptcy law, are helping. So too are steps to enhance banks’ access to data on SMEs, with the launch of commercial scoring on the Al Etihad Credit Bureau being a good example. Indeed, the authorities have listed SME contributions to non-oil gross domestic product (GDP) as a key component in the push towards a knowledge economy as part of the Vision 2021 national agenda.
