UAE bankruptcy law a boost for SMEs and the economy
Emirates NBD, Dubai’s biggest bank by assets, has hailed the new bankruptcy law, saying it will boost the fortunes of small and medium-sized enterprises by curtailing losses as debt is rescheduled, and earning them better interest rates in the long run as risks associated with these businesses diminish.
“When things go wrong, the new law will help in better recoveries and lower losses as business owners will seek to reschedule and pay off the debt instead of absconding, and over time this will result in more beneficial lending criteria for SME businesses,” said Suvo Sarkar, the head of retail banking at Emirates NBD.
The lack of insolvency regulations during Dubai’s credit crisis between 2009 and 2010 led to a number of businessmen being detained for unpaid debts, with many fleeing the country to avoid arrest.
Some small business owners have fled over the past two years, leaving behind unpaid loans.
Among other things, the law will put a moratorium on sending people to jail for bounced cheques until a restructuring plan for business owners has been agreed with creditors.
Aside from the holes in their balance sheets created by defaulters who have skipped town fearing imprisonment, lenders as well as business owners have also been reeling from a general economic slowdown following the crash in the price of oil since the summer of 2014.
Mr Sarkar said the bankruptcy law will give SMEs more incentive to take the kind of risks that help to boost economic growth.
“The new law will certainly give a boost to would-be entrepreneurs wanting to set up new businesses, as well as to existing businesses to think bigger and take calculated risks,” he said.
“This is especially so for the newer economy, including the digital sector, where failure is part of the entrepreneurial journey and entrepreneurs look to ‘failing quickly’ before being successful.”
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Published: September 7, 2016 04:00 AM