Abu Dhabi, UAEWednesday 25 November 2020

SME market needs to focus on productivity, access to finance and sustainability

SMEs make up about 99.2 per cent of companies in Dubai and contribute to 46 per cent of the emirate's GDP

10 years ago, Downtown Dubai (background) and Business Bay (foreground) were mostly just visions - today, as pictured, they're communities that house residents, restaurants, free-to-visit parks and more. Reem Mohammed / The National
10 years ago, Downtown Dubai (background) and Business Bay (foreground) were mostly just visions - today, as pictured, they're communities that house residents, restaurants, free-to-visit parks and more. Reem Mohammed / The National

Small and medium-sized companies need to invest more in the development of employees, gain greater access to capital and increase sustainability initiatives, according to a State of SMEs Study survey by Dubai SME, the government agency supporting the sector.

The report released at the UAE Economic Forum on Thursday, reviewed SMEs in Dubai on seven criteria: international orientation, degree of innovation, digital readiness, human capital development, corporate governance, orientation towards sustainable practices, and access to finance.

SMEs need to examine their business models and implement new technologies in their operations to keep up with the rapidly changing business landscape, the study found. Essam Al Disi, director of strategy and policy department at Dubai SME, said that some SMEs are barely aware of technologies such as IoT and blockchain, and even if they were, they were unsure of how to implement them in their business.

The lack of tailored, affordable financing solutions is a big challenge impacting SMEs, who need external funding to grow. Interest rates charged by banks to SMEs remain “extremely high”—ranging between 14 per cent and 24 per cent. As much as 65 per cent of businesses are rejected for lending, which is five times higher than the median rate of OECD countries, the report found.

Sustainability is another area that SMEs need to improve on, said Mr Al Disi. Green products and solutions need to be integrated as part of a company’s business operations, in line with Dubai’s sustainable development goals.

“About 99.2 per cent of establishments in Dubai are classified as SMEs. They account for 51 per cent of the workforce, contributing to around 46 per cent of the emirate’s GDP,” said Sami Al Qamzi, director general of Dubai Economy in the report.

SMEs are the backbone of any economy, making up for the bulk of economic activity and employment. SMEs in Dubai contributed Dh198.6 billion, or 46 per cent, of the emirate’s GDP in Dubai, the report said. Between 2008 and 2017, there was a 6 per cent increase in the contribution of micro, small and medium enterprises to GDP, and in the case of medium-sized enterprises the increase was higher at 28 per cent in 2017, from 17 per cent in 2008.

Micro firms account for 61 per cent of total businesses, followed by small and medium firms which account for 36 per cent and 2 per cent, respectively, of the total number of enterprises in Dubai, according to the report. The proportion of small businesses has doubled since 2008.

The report is the second edition of State of SMEs Study published by Dubai SME. The first was launched in 2014.

Updated: December 12, 2019 06:43 PM

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