On the Importance of Small and Medium Enterprises (SMEs) in

Dubai

Mohamed TRABELSI

March 18th, 2015

Source: World Development Indicators (2014) and Dubai Statistics Center (2014)

Small and Medium enterprises (SMEs) in Dubai

SMEs in Dubai represent:

95% of all firms registered

42% of the labour force

40% of the emirate’s GDP

Figure (2): Whether the establishment applied or not for loans or lines of credit (%)

Source: Business Environment Survey (2012)

Figure (2): The ratio of SME loans to total loans in the MENA region (%)

From the point of view of enterprises (Business Environment Survey 2012)

The preference of SMEs to rely on their own funds may

be accounted for by insufficient collateral, i.e.

unacceptable or unsuitable collateral.

From the point of view of banks (survey covering 7 banks operating in Dubai)

The banks are agreeing that SME’s opacity or lack of

transparency is one of the major obstacles facing lending to

SMEs.

Credit information system is also important as the absence

of information on borrowers regarding their creditworthiness

leads to information asymmetry and creates a risk premium

for those who want to access bank finance.

Main Recommendations

Improving the current regulations on collateral requirements to

make them more flexible. This includes encouraging banking

institutions to accept movable properties as collateral which

needs a deep reform of secured transaction laws and registries.

The development of an independent institution that keeps

track of credit information on borrowers. The different

experiences across developing countries is an important

element in improving the access to finance to individuals’ and

corporates’ borrowing.

THANK YOU FOR YOUR ATTENTION