Government-related entities pledged their support for small and medium enterprises at a forum in the capital yesterday as entrepreneurs revealed the challenges they must overcome to build successful enterprises in the UAE.
“Anybody who wants to work with Strata today, I am prepared to give a 10-year contract to any investor who is willing to do it in conjunction with the Khalifa Fund, provided that you simply meet my quality requirements and on time deliveries,” said Badr Al Olama, the chief executive of Strata, an Al Ain-based airplane parts company. “I buy a lot of things outside. I don’t need to do that. I am willing to switch supplier tomorrow.”
UAE policymakers have been counting on smaller businesses to play a key role in the development of the Emirates’ economy. SMEs account for 86 per cent of the workforce in the private sector, according to the Ministry of Economy. Nearly 300,000 companies can be classified as part of the SME sector, ministry data showed. The UAE is especially keen to give its nationals a chance of helping the economy by starting their own businesses and a number of big companies are promoting the initiative by inviting SMEs to be their suppliers.
Business owners took to the stage at the 10th annual International Network of Small and Medium Enterprises (INSME) on Yas Island yesterday to talk about the trials and tribulations of setting up shop in the UAE, where funding is often hard to come by.
Najah Al Muntafiq, an Emirati mother who started a boutique chocolate business in 2012, spoke at length about how the forum organisers, the Khalifa Fund for Enterprise Development, supported her initiative when others either denied her funds or offered her high interest rates that would have scuttled her plans for CocoJalila.
The fund gave her Dh900,000 of the Dh4 million she had asked for to start her business. That wasn’t enough to open the shop she had hoped for but still gave her the capital to import the Italian chocolates she sells.
“I spent one-and-a-half years trying to get funding for my idea but no door would open to me and banks were far too expensive,” Ms Al Muntafiq said. “And then someone suggested the Khalifa Fund. I couldn’t open a shop but I could start my business.”
The squeeze on SME lending amid tightening regulations has already had an effect on local businesses. Last year, HSBC said it was reducing its exposure to this type of lending and told many of its SME customers that they would need to find new banks to do business with. It stressed, however, that it would not be winding down its SME activities completely, and in November it launched a Dh1 billion international trade fund for SMEs in an effort to reassure entrepreneurs that banks were still keen to extend loans.
“With regards to funding, SMEs across the world face a huge challenge in getting access to grants,” said Hussein Jassim Al Nowais, chairman of the Khalifa Fund. “Fear of failure which has become even more acute after the recent global crises often discourages commercial banks to provide grants. The share of total loans for SMEs is not more than 2 per cent in the GCC and rises to 8 per cent in the UAE.”
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