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Central Bank of UAE issues regulations on the conduct of SMEs

Dubai - The purpose of the regulation is to improve SMEs’ access to financial products and services

The Central Bank of UAE (CBUAE) on Sunday issued a regulation for small to medium-sized enterprises (SMEs) to promote best practices among licenced financial institutions (LFIs) when engaging with SMEs.

The purpose of the regulation is to improve SMEs’ access to financial products and services. The central bank's launch of this regulation follows the launch of its new regulatory framework for financial consumer protection.

The regulation seeks to promote a culture within LFIs of dealing with SMEs by defining their obligations when dealing with SME customers. These include setting standards of business and market conduct by LFIs; strengthening the governance and oversight over the design, promotion and sale of financial products and/or services; and promoting responsible financing practices.

“SMEs play an important role in the UAE’s economy. The UAE government has placed great emphasis on developing the SME ecosystem and removing obstacles to a transparent, enterprising and innovative SME sector in the UAE, which has good access to various financial resources,” said Abdulhamid M. Saeed Alahmadi, governor of the Central Bank of the UAE, said.

“The Central Bank of the UAE aims to ensure that SMEs enjoy the highest business standard when interacting with licensed financial institutions, in line with our new consumer protection mandate. We are confident that this regulation will facilitate the provision of best-in-class products and services to SMEs,” said Alahmadi.

The regulation promotes the CBUAE regulatory agenda by setting standards for market behavior of LFIs; strengthen management over the design, promotion and sale of financial products and services, and promote responsible financing practices and appropriate disclosure of risks. In addition, it provides SMEs with access to timely and accurate information to make informed decisions, implements clear mechanisms for correcting complaints by SMEs and requires appropriate debt counselling.

LFIs must ensure that the opening of a bank account for a SME must be completed within three working days, provided that LFIs undertake the necessary due diligence related to the enforcement of financial crimes and that SMEs have a low risk of money laundering or terrorist financing.

The regulation also requires LFIs to establish an independent and effective complaints management function to ensure fairness, transparency and neutrality in the resolution of complaints.

The objective of the regulation is to enhance SMEs’ access to financial products and services. The central bank’s introduction of this regulation follows the launch of its new Financial Consumer Protection Regulatory Framework.

“SMEs play a vital role in the UAE’s economy. The UAE government has placed considerable emphasis on developing the SME ecosystem and removing obstacles for a transparent, entrepreneurial, and innovative SME sector in the UAE, which has good access to various financial sources,” said Alahmadi.

— issacjohn@khaleejtimes.com