UAE start-ups take an average time of 63 days to open a bank account due to the extensive documentation processes involved, according to a new white paper by Hub71.
However, this could be reduced to less than five days if the paperwork required is simplified and there is better coordination between different entities, it added.
The Abu Dhabi-based tech accelerator collaborated with First Abu Dhabi Bank – the UAE’s largest lender by assets – and Mashreq Bank to produce the study.
The report further found that three in 10 start-ups fail to open a bank account in the UAE, forcing them to approach foreign lenders that usually charge “high international fees and presents lost opportunities for UAE banks”, Hub71 said.
“Setting up a UAE bank account is critical in order for start-ups to thrive,” said Nader Museitif, head of partnerships and business development at Hub71.
“We are looking forward to drive positive change by working closely with our financial institution[s] and regulator partners.”
In partnership with FAB and Mashreq, the accelerator has facilitated several pilot projects within its own start-up community to analyse and optimise account opening processes for new companies.
“Bank account opening was a lengthy and tedious process ... every time we reached out to the bank, we needed to hand in different documents,” the report quoted a founder of a Hub71 start-up as saying.
“Without a local bank account, my transactions are from foreign banks … all payments are subject to foreign exchange rates and transfer fees that are hurting my margins,” said another founder.
Currently, start-ups say that the checklist of documents required to open a bank account are not specified.
When such a list is provided, a start-up has to go through “several rounds of iterations before being able to submit all required documents” to open an account, Hub71 said.
They also experience delays when it comes to collecting, notarising and authenticating the documents, it said.
The tech hub, whose more than 50 global start-ups have collectively raised more than $139 million (Dh510.1m) to date, will be releasing additional results from the pilot programmes and a new banking product tailored for start-ups in the last quarter of this year.
Hub71, which was set up in March 2019 by the Abu Dhabi government, Mubadala Investment Company, Abu Dhabi Global Market, Microsoft and SoftBank, is a flagship initiative of the Dh50 billion economic stimulus programme, Ghadan 21.