Business owners say that not being forced to raise Dh150,000 before launching will stimulate more people to start own firms
Entrepreneurs cheer change
ABU DHABI // When Mohamed al Awadhi and his brother Payman decided to ditch lucrative careers with multinational companies to launch a shawarma restaurant, they knew cash would be an issue. In addition to finding a suitable building, navigating their way through the tangle of bureaucratic paperwork and tracking down both ingredients and staff, one pricey hurdle remained. They had to lay their hands on Dh150,000 (US$41,000).
But that federal requirement was scrapped this week by order of Sheikh Khalifa bin Zayed, the President of the UAE, a move the brothers say came none too soon. "Dh150,000 is a lot of money for any small business to find," said Mr al Awadhi, 35, whose restaurant, Wild Peeta, will open on Saturday. "Finding such a large amount of money can be quite a problem for small and medium companies. "I guess a lot of great ideas for new businesses have never actually made it because they couldn't find the Dh150,000 start-up money.
"It is wonderful that they have realised it has been a barrier and decided to abolish it." Mr al Awadhi, who is from Dubai, said he and his brother approached banks, family and friends for their funding. He added that the change in policy would stimulate the launch of independent shops and give consumers more choice. "Sheikh Khalifa and Sheikh Mohammed are huge supporters of small businesses," he said.
"They realise small businesses are crucial to the growth of the economy." The change in law was announced this week, but the state news agency, WAM, did not provide details on precisely when the start-up cash condition was dropped. Other entrepreneurs also welcomed the move, saying it was the latest effort by the Government to encourage the creation of small and medium-sized businesses. Those types of companies have been hit hard by tight credit conditions during the financial crisis.
Bassel Ali, 27, of Syria, launched his Bassel Mohammed metalworking and carpentry company in Khalifa City A this year. He also struggled to raise the required cash. "It was a setback, but once I had done it, the rest was easy for me," he said. "Scrapping this minimum amount is a mercy for entrepreneurs." "Many people I know do not try to start their own companies because of the difficulty in overcoming this issue," he added.
"Also, the municipality knows that many people simply borrow the required amount, put it in their bank account, issue a bank statement and then withdraw it; so it is only a formality. "I am happy that it is no longer a requirement." Mohammed Abudullah Mohammed, 27, of Abu Dhabi, has been keen to launch his own internet cafe but has been put off by the high costs. The decision to scrap the capital requirement was helpful, but other more significant financial barriers remained, he said.
"What makes people reluctant to start a business is high rents," he said. "Other issues include the monopoly over taxis or buses. Living expenses are high and many people cannot afford to start big businesses or even very small ones." firstname.lastname@example.org email@example.com