SMEs need more financial fillip

RITIKA SHARMA /
Emirates Business

Though much is being said and done to promote small and medium scale enterprises (SME) in the region, there are certain aspects that need special attention, experts opine.
A recent report suggests
that SMEs in the region are
still struggling with funding gaps and lack of commercial expertise.
It is notable that while SME sector has emerged as one of the major growth drivers for
region’s economy in recent years, financing remains a concern, despite all the support the sector gets from various government and non-government organisations.
A recent report by UAE-based Al Masah Capital, on venture capitalism and SMEs, states, “With banks being averse to risky investments, the SME sector did provide a scope for expansion of the private equity markets, and improved access to venture capital for SMEs.” However, the report maintained, that SME sector is facing the problems of funding gap and vital know-how.
Talking above the above report, Ellisa Vertis, who runs a business of reusable products in Dubai, told Emirates Business, “This (funding gap) is a major concern especially in the UAE where according to the Ministry of Economy, SMEs represent almost 92 percent of the total number of companies and provide more than 86 percent of jobs in the private sector.”
The scenario is similar globally where according to official reports, ‘funding gap’ of over $4 trillion exists. However, UAE banks are ensuring that at least 10 percent of their loans are directed to SMEs, but experts believe more barnstorming is needed in this direction.
“However, I have had a good experience with initial funding but, a few of other entrepreneurs I know, had to drop their business ideas because they could not find the right financial support,” pointed out Vertis. It is notable that banks and financial institutes hesitate to give huge loans to people with less or no commercial experience and this is a major barrier in start-up growth.
Abdul R A, an Egyptian national living in Abu Dhabi, who had to drop his first business plan due to lack of funds told Emirates Business, “I had a very hard time convincing banks to sanction my loans. I was a student and no one trusted me. In the end I asked for financial assistance from my relatives and now my business is gradually gaining grounds.”
Abdul added, “As much support as the region has been giving to budding entrepreneurs, it is sad to see how many business ideas die every day due to funding gaps. More attention towards this aspect can make a huge difference in the overall SME market and in the regional economy on the whole.”