Looking for Improved SME Funding? Here's How Dubai Will Help

While we know that Emirati economic policies are aimed at promoting business activities, we may often associate that with large multinational corporations setting up operations in Dubai, Sharjah or Abu Dhabi. But, what if we told you that SMEs are the engine that power the economy of the United Arab Emirates

sme funding

SMEs power the Emirati economy, but they have trouble accessing funds

At first glance, the numbers may appear surprising. More than 94 per cent of all enterprises currently in operation in the UAE are SMEs; this sector of the Emirati economy is responsible for jobs for more than 86 per cent of the UAE’s private sector workforce. When we remove oil from the equation, these companies contribute to over 60 per cent of the economy, according to a 2019 National Bank of Fujairah report cited in an Arabian Business investigation. 

Over the coming years, the official economic projections expect SMEs to contribute to 45 per cent of the UAE’s gross domestic product (GDP), an increase from the current 40 per cent. However, in recent years, companies have experienced significant challenges in acquiring the SME bank financing in Dubai that could help propel the desired increase in GDP contribution. 


Difficulty in accessing banking services

In 2009, British entrepreneur Simon Ford fled Dubai with one million dirhams in unpaid debt after his online business Blue Banana went under, claiming that there was a lack of a bankruptcy law. To this day, investors claim they will never see the money. The ramifications of Ford and other failed entrepreneurs leaving with outstanding debt caused banks in the UAE to come together in 2015 to prevent other SME owners from leaving the country without first paying their debt back.

According to a Roland Berger study, now less than four per cent of lending from Emirati banks is designated to small and medium-sized enterprises. Due to this, the percentage of business owners in the UAE who have difficulties opening a SME bank account is as high as 65 per cent. It appears that many banks are operating out of fear and feel that SME banking is a privilege rather than a fundamental component of running an enterprise. 


sme business finance


SME funding options

In the Middle East and North Africa (MENA) region, the SME funding gap is $260 billion. While the Funding Circle does not currently operate in the UAE, other initiatives are sprouting up to mitigate this financing gap and offer more SME funding options. There are a plethora of SME business financing and SME impact funds out there. They include the Khalifa Fund, worth $545 million, that provides new businesses with seed capital and SME loans at low interest rates. In February 2019, the Emirates Development Bank (EDB) announced a Credit Guarantee Scheme to support smaller enterprises worth $27.2 million. 

The Dubai Financial Services Authority is also trying to help these enterprises access equity markets by releasing a consultation paper that outlines proposals for a regulatory regime that permits SMEs to list their shares on an authorised market institution (AMI) in the Dubai International Financial Centre (DIFC).

The idea of the DFSA scheme is to mitigate the investor fear that has caused problems for SMEs in gaining investment funds and allow them to access equity capital markets in or from the DIFC by providing appropriate and proportionate regulatory standards, while also providing adequate levels of investor protection. This also aligns with the Dubai Plan 2021 initiatives from the Dubai government authorities. 


Are you interested in starting your SME in Dubai?

Our team of Dubai company formation experts can walk you through the available options you have at your disposal at banks and other sources, whether through a Free Zone, offshore, or the mainland. If you want your idea to reach its full potential in a business-friendly economy, don’t hesitate to contact our team and start the process today. 


Written by

Adrian Oton

CEO, Europe Emirates Group 


UAE Setup Guide

Related Post
Economics 12 November 2016

Ensuring Substance Of Operations

Economics 30 July 2016

Are the "Tax Haven"'s Days Numbered?

Economics 10 May 2017

The Top 5 Most Profitable Industries and Business Avenues in Dubai

Economics 27 May 2017

Supporting Dubai’s New Generation of Female Business Owners

Economics 21 June 2017

A Changing Mindset, a Shift in Power - Female Entrepreneurship in Dubai

Economics 1 December 2021

The Future’s Bright for Business Start-Ups in Dubai

Subscribe to our Newsletter
Sign up for our monthly news and updates about company regulations worldwide.