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Transparent SME-bank relationship key to healthy entrepreneurship environment

A major challenge faced by small and medium enterprises, which comprise 90 per cent of the companies operating in the UAE, is limited access to finance, financial experts said at a seminar on Sunday. Opening the discussion, Abdul Aziz Al Ghurair, Chairman of UAE Banks Federation (UBF), said transparent SME-bank relationship is key to nurturing healthy entrepreneurship environment in the UAE.
"It is clear that there is a need for the financial sector to facilitate more effective SME-bank relationships through awareness initiatives that will enable companies to successfully secure the external financial support they need," said Al Ghurair.
The UAE is giving big priority to SMEs across policies and initiatives with an aim to boost the share of the segment in national economy to 70 per cent from 60 per cent by 2021.
The government has initiated some strategic measures towards the goal of achieving a GDP share of 70 per cent from the SME sector by 2021.

There is already a law in place to regulate the relationship between all government institutions and SME entrepreneurs. The law is a turning point in empowering people and realising the aspirations of our younger generation. Another move is the setting up of a council to drive growth of SMEs and entrepreneurs in the country.
Hosted by Emirati Entrepreneurs Association (EEA), in partnership with the UBF, the seminar, "Entrepreneurs and Banks" was conceived as an open platform for UAE entrepreneurs to bring to light key finance challenges facing SMEs and explore ways to support them to grow their businesses.
Stressing the importance of a healthy entrepreneurial sector in the UAE, Al Ghurair said for SMEs to secure finance from banks, they first need to recognise market needs and the available investment opportunities.
"It is also crucial that they focus on a diverse service portfolio and not limit the scope of their business to only a few activities. Creativity is another important element for SMEs to cut through the clutter and stand out from the competition by continuously building their internal capabilities and competencies," Al Ghurair said.
"SMEs are the backbone of any country's economic framework, so it is of the utmost importance that they receive adequate support in turning their entrepreneurial vision into a successful business proposition," the UBF head said.
He said a number of banks initiatives are already in place to support them financially, and the latest of which was the UBF's Modus Operandi - a dedicated program for financially-troubled companies, amongst others. "We urge entrepreneurs start-ups to take advantage of the resources available to them to avoid hindrances that may slowdown the process of setting up their businesses," said Al Ghurair.
Sanad Al Meqbali, Chairman of EEA, noted SMEs face several challenges when trying to identify financing resources. Today's "open dialogue is aimed at facilitating stronger communication and collaboration channels for the benefit of all involved."
"Providing SMEs with the required financing serves as an impetus to encourage innovation and proactivity among entrepreneurs, which can be further strengthened by extending all the support they need through co-ordination with the concerned parties, to help secure their sustainable growth and continuity," Al Meqbali added.
Jassim Al Bastaki, Secretary General, EEA, who moderated the session, pointed out that SMEs represent one of the main economic pillars of a nation, and their role and contribution in achieving a country's economic and social objectives are widely recognised around the globe.
"The relationship between banks and SMEs, with respect to financing, is currently facing a number of challenges, and is directly linked with the securities provided, the repayment periods, and the development of a financing service to meet the needs of the SME sector and support its long-term growth," said Al Bastaki.
A number of recurring themes surfaced from the discussions with the participating entrepreneurs like absence of an organizational governance structure, in addition to the lack of appropriate training opportunities, innovation capabilities and business experience. Challenges associated with cash flow and pricing policies, limited access to technology, insufficient knowledge of the industry and market and failure to secure effective negotiations with external stakeholders were also identified as roadblocks.
- issacjohn@khaleejtimes.com