A fiscal lifeline for small businesses
Loans to small- and medium-sized businesses can have a disproportionate impact on the country's economy. It is, after all, the small players that best innovate and takes risks, the very type of risks Abu Dhabi needs as it looks to diversify its economy away from oil.
Why, then, has it become so difficult for some business-minded residents to obtain a loan for their endeavours? Sound lending makes sense, but turning off the tap seems short-sighted at best.
As TheNational reported yesterday, expatriates seeking to start up businesses in the UAE are finding it increasingly difficult to secure loans to fund their projects.
"Start-ups normally have to have their own funding," says Akram Khan, the senior vice president and group head of corporate banking for Ajman Bank. "Bank financing will only come in after there is a track record."
Days of easy credit are, thankfully, an affliction of the past. But denying legitimate loans to companies whose very presence will inject critical capital into the economy is self defeating.
At present, repayment risks are compelling banks to lend money to those with local sponsors, but more flexibility here is needed. A system to help non-Emirati entrepreneurs connect with local sponsors could go a long way in increasing the UAE's ease of doing business which, according to the World Bank, is easier in Mexico, Colombia and Macedonia.
Funding is not the only hurdle to success; those who have secured their own funding still face obstacles such as increased licensing and registration fees and sluggish bureaucracy.
An Arab expatriate who started two enterprises in construction and contracting in Al Ain told The National that, unlike four years ago, he does not break even due to heavy fees on each worker he hires, licensing and renewal. He is now considering closing his businesses and looking for office work.
These stories are more than personal tales of woe; they speak to the health of the Emirates' economic future. The successful strengthening of the private sector is and will remain a key measure of the nation's efforts to diversify in the years ahead.
Published: August 22, 2011 04:00 AM