Emirates Development Bank (EDB), the state-controlled lender, is allocating about Dh1 billion to fund small and medium-sized enterprises run by Emirati entrepreneurs this year and next.
EDB, which extends funding to UAE nationals, will finance up to 80 per cent of fixed assets and purchases of SMEs in the country with attractive interest rates, flexible tenors, and convenient instalments, it said in a statement.
"Small and medium-sized enterprises are two of the most important cornerstones of the UAE's national economy, as they play a vital role in its progress," said Obaid Al Tayer, UAE's minister of state for finance.
SMEs are a key component of UAE's business sector and the government wants their contribution to reach 70 per cent of GDP by 2021. That will help fuel the growth of the country's non-oil economy as the government looks towards diversification and less dependency on energy.
However, smaller companies have taken a hit in the last few years as the economy slowed amid falling oil prices. Many have struggled to pay their debts amid payment delays and failed to get new credit lines as banks reduced their exposure to the SME sector.
The Central Bank of the UAE is now working on initiatives to help smaller businesses get access to fresh funding on more accessible rates. It is coordinating with the UAE Banking Federation for the revision of rules and operating procedures for lenders dealing with the small companies.
Mr Al Tayer, who is also the chairman of EDB, said the bank is offering UAE Nationals a "comprehensive set" of products including sales and receivable financing; business expansion loans and project financing; and asset backed financing and purchase financing.
EDB in December said that it plans to allocate Dh450 million of its Dh1bn budget in 2018 alone to support the country’s SME sector.