Government to back small businesses

Loans will be provided to small and medium sized enterprises through a new, federal-level programme.

The Government plans to provide loans to small and medium sized enterprises (SMEs) through a new, federal-level programme to be administered by local banks and targeted towards Emiratis, officials said today. The programme, which will also establish a Federal-level framework for Government support of SMEs, will be designed to help businesses overcome a persistent shortage of credit that has hampered their growth. "One of the most important lessons we have learnt from the financial crisis is to focus on small and medium sized enterprises," said Sultan al Mansouri, the minister of economy, at the First UAE Symposium on Small and Medium Size Businesses today in Dubai. Since the onset of the financial crisis, officials have expressed worries that cash-strapped banks may be cutting back on existing loans to smaller businesses, as they try to consolidate their loan books. "I call on all the financial institutions in the UAE to support these small and medium sized enterprises. ? We expect the banks to dedicate a certain amount of their capital in supporting these SMEs," Mr Mansouri said. "We understand that some banks are passing through a crisis and suffering some problems, but we also believe that our banking system is restoring its previous system. ? I am sure the bank will also benefit significantly from supporting these enterprises." According to Sultan al Suwaidi, the governor of the Central Bank, the Government will also back bank loans to SMEs, in order to encourage lending. "Banks that join the programme can provide finance against government collateral. In the first phase, the government might provide full collateral for the amount, and then after that we can reduce this according to the changes in the markets," he said. The programme will also be designed to simplify the application process for businesses applying for special funding, and for legal and financial advice. Although individual funds and programs designed to help SMEs already exist within individual emirates, officials said there was a need for a standardised, national definition for what type of businesses qualify as SMEs. Once this framework is outlined and Government support is provided, banks will be able to increase their internal lending framework dedicated to SMEs, Mr Suwaidi said. "We understand that this process will take some time, but since there are over 600 branches of banks in the UAE, I think the auditing and reviewing process can be made very easy. What I suggest for banks is to jump over the centralisation in management and give more authority to the branches," he added. The new programme, which will be headed by the Ministry of Economy will be targeted at Emirati citizens. Providing women with access to funds will be a particular focus of the programme, Mr Mansouri said. [e-mail]