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Global economy is facing uncertainties as never before. It’s challenges galore out there. The business ecosystem is changing in the flicker of an eyelid. And the small and medium-sized enterprises (SMEs) are not untouched by these swift changes. No wonder then the UAE government has a tough task ahead: not just to support the segment but also to ensure that the sector doesn’t lose the huge growth potential it holds.
Last year, more than 22,000 SMEs were established in Dubai. There are over 350,000 SMEs in the country and these provide jobs for 86 percent of the private sector workforce. Moreover, their share in non-oil GDP is 60% right now. By 2021, it is expected that this will grow to 70%. Considering these, developing a healthy SME sector is imperative for the policy-makers.
The loan defaults made by the SMEs surely pale into insignificance when we weigh their benefits with the losses. But that doesn’t mean these defaults shouldn’t be checked. Offering credible credit guarantee scheme will decrease the default rate, for sure. Besides this, over-borrowing shouldn’t be encouraged. Putting tougher lending caps would help too.
This in no way denotes that the segment should be restricted. On the contrary, it has to be given acceleration. Banks can’t afford to ignore the segment. SMEs require guidance and care and so the banks/lenders must be agog and committed to provide the necessary assistance to these enterprises.
The next decade will be the decade of SMEs. The sector will shape the economic landscape of the UAE. As we talk of economic diversification away from oil, SMEs will also need to move away from the trading-dominated model as they focus on sustainability and innovation.
Notwithstanding the steady oil slump, the business uncertainties and market risks, the SMEs can flourish and thrive if they get a conducive environment. The arbitration legislative bill will be a step that would just do that. The segment will gain from it. The microeconomic environment will improve when the trust deficit between the lenders and borrowers goes. It has to be a win-win situation for both.
With right nurturing and direction, SMEs can make UAE’s economy more resilient and robust.
Recently, the SME World 2016 summit discussed ways to exchange the experiences of different entrepreneurs of SMEs. It also aimed at promoting the networking between them. This is very crucial as it would help the segment to break the barriers and plug their loopholes. Empowering the SMEs with tools that can make them realize their potential will go a long way in solidifying the UAE’s economy.