EDB signs credit guarantee pact with ADCB to boost SME lending

The state-owned lender will guarantee up to 50% of financing extended by ADCB to UAE businesses

ADCB executive Saoud Al Jassem, left, and Shaker Zainal of EDB during the signing ceremony. Photo: EDB

Emirates Development Bank, the state-owned lender focused on financing companies in key industrial sectors, and Abu Dhabi Commercial Bank have signed a preliminary agreement for a joint credit guarantee programme for small and medium enterprises in the country.

The partnership is expected to boost the financial inclusion of SMEs in the UAE and give them access to strategic funding options, EDB said on Monday.

Under the initiative, EDB will guarantee up to 50 per cent of the funding extended to SMEs by ADCB, the third biggest lender in Abu Dhabi by assets.

“EDB is dedicated to growing the UAE economy by supporting the sustainable development of our nation’s SME ecosystem,” said Shaker Zainal, EDB’s chief officer for micro, small and medium enterprises.

“Through this MoU, EDB will help fill critical lending gaps and provide solutions tailored to financing the growth of the SME sector.”

The partnership with ADCB is in line with EDB’s goal of providing Dh30 billion ($8.17 billion) in financing to both large corporates and SMEs operating in the key sectors of the UAE economy by 2025.

EDB plans to allocate Dh5 billion of the total funding target through credit guarantee programmes.

SMEs are the backbone of the UAE economy, comprising 98 per cent of the companies operating in the country.

The development of the sector and measures to hasten the growth of the start-up ecosystem are among the main priorities of government as it chalks out development strategy for the next 50 years.

EDB, which is at the heart of government’s push to improve the access of start-ups and small businesses to financing, has already unveiled several initiatives.

In the first nine months of this year, EDB approved Dh1.3 billion in loans to SMEs, comprising of Dh806 million in direct lending to UAE companies and Dh485 million in indirect financing through its credit guarantee programme with partner commercial banks, EDB said on Monday.

In August, EDB launched a lending feature that allows businesses to apply for loans of up to Dh5 million and receive approval feedback within five days.

Start-ups and SMEs can apply for quick loans directly through the bank's digital banking app.

The service, launched in partnership with peer-to-peer lending platform Beehive, is aimed at further improving SMEs' access to finance and simplifying the conduct of business in the country.

The lending service is available to UAE-based businesses in EDB’s five priority sectors — manufacturing, health care, food security, advanced technology and infrastructure, the lender said at the time.