Some Dh400 million has been distributed by Abu Dhabi's Khalifa Fund to Support and Develop Small and Medium Enterprises, but financing is still an issue says its chief executive.
Finance key stumbling block for UAE small businesses
Government and private-sector leaders say a lack of financing for small businesses across the UAE remains a stumbling block for a key driver of the country's non-oil economy.
Some Dh400 million has been distributed by Abu Dhabi's Khalifa Fund to Support and Develop Small and Medium Enterprises to 233 projects since its inception three years ago.
But today Dr Ahmed al Mutawa, the chief executive of the Khalifa Fund, said his organisation's mission of reducing unemployment among Emiratis and setting the stage for private business creation was hampered by banks' focus on big loans for big corporations.
"Creating organisations to fund small and medium enterprises and encouraging banks and commercial finance bodies to devote a greater part of their funds to small and medium enterprises will reflect positively on the national economy," he said at a conference in Abu Dhabi.
Seeding a private sector populated by thriving small businesses has become a priority for Federal and emirate-level governments as they prepare for an influx of hundreds of thousands of Emiratis into the workforce during the next decade. More than half of locals are under the age of 20, a population governments are trying to prepare for private-sector work in favour of scarcer government jobs.
Mohammed Abdulaziz Alshihhi, the undersecretary of the UAE's Ministry of Economy, said at the conference, the Abu Dhabi Forum for Small and Medium Enterprises, that aiding small businesses would enhance competitiveness, spur innovation and attract foreign investment into the UAE. Addressing the lack of financing, high costs and few skills among Emiratis to run businesses was crucial "in building a robust and dynamic economy capable of adapting easily to all the economic changes", he said.
Rectifying the financing dearth, though, appears to be at the top of the agenda. Mohammed Abdullah, the undersecretary of the Abu Dhabi Department of Economic Development, said the Government had to "double efforts" to help small businesses by broadening financing options and through legislative changes that include a new small business law that government ministries expect to be put into place next year.
The financing problem stems from banks' preference for profitable loans to big businesses instead of riskier and less profitable ones to small firms, according to Jean Claude Plana, the head of the United Nations Industrial Development Organisation in France. Banking analysts say few of the UAE's banks aside from the Commercial Bank of Dubai have made financing for small outfits a priority.
"Finance exists, but [small businesses] don't have access to it," Mr Plana said. "Often it is easier to find [$]10 million than [$]10,000."
"It is more risky because the company is young, not very stable, relying on a small number of people, so this is where we are trying to put more efforts behind … access to financing," he said.