The UAE government's new set of economic initiatives will bolster the growth of small-and-medium-enterprises (SMEs) and "crystalise efforts" to back entrepreneurs, the chief executive of Dubai SME said.
On June 28, Sheikh Mohammed bin Rashid, UAE Prime Minister and Ruler of Dubai, announced new initiatives aimed at supporting family companies, helping start-ups and attracting more skilled workers to the UAE.
"The digital economy is the future economy, the business model will change, that change is not easy and needs perseverance," Abdul Basit Al Janahi, chief executive of Dubai SMEs said at a press conference on Tuesday. "Everybody knows that entrepreneurship and SMEs are the beginning of everything. From a regulatory point of view ... the initiatives make our lives and the entrepreneurs' lives easier."
The initiatives are part of the UAE's drive to become a knowledge-based economy. They include an entrepreneurial academy (Skill-Up Academy), a new platform to support the growth of start-ups (Scale-Up Platform) and an online portal to provide investors with comprehensive information about investment opportunities in the UAE.
In addition, an accelerator for family-owned businesses will help them access new markets. An economic research institute established in collaboration with leading universities will drive R&D and a global investment conference (Investopia) will be held in March next year.
Dubai SME also said its new digital crowdfunding platform received 543 requests for funds from entrepreneurs since its launch in May. Of these, it approved 44 requests to go live on the platform, where backers can select and support projects.
Dubai Next, the not-for-profit crowdfunding platform operated by Dubai SME, received total funding requests for more than Dh27.7 million.
The selected projects received 72 funding contributions from 58 investors, Dubai SME officials said at the press conference.
Dubai Next has helped to "democratise and simplify" fund-raising for SMEs, Mr Al Janahi said.
The platform collects the funds in an Escrow account in MBRF and guarantees the project to encourage investors, Mr Al Janahi said.
Dubai Next has helped Emirati start-up Padel 26 to raise the capital required to launch, generating Dh100,000 on the platform with the rest of the capital provided by The Mohammed Bin Rashid Fund.
Padel 26, a project that involves indoor doubles courts for the sport of padel, is the first project to raise capital on Dubai Next.
Crowdfunding involves sourcing small amounts of money to support a single commercial venture.
Dubai Next allows individuals and companies to support a project initiated by a friend of family member.
The amount can be refunded if the project fails to reach its target fund amount. Entrepreneurs retain 100 per cent ownership of their project and the platform cannot be used to offer equity.
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
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