SMEs' GDP input set to hit 70% by 2021
Sultan bin Saeed Al Mansouri speaks at the sixth UAE Conference on SMEs and Innovation in Dubai on Monday.
Dubai - Minister of Economy asks banks to hike lending to sector
The UAE's vibrant small and medium enterprises, or SMEs, are expected to play a more significant role with their contribution to the national economy set to grow to 70 per cent by 2021, Sultan bin Saeed Al Mansouri, Minister of Economy, said on Monday.
In his inaugural address at the sixth UAE Conference on SMEs and Innovation, the minister said SMEs, as a key driver of the UAE economy, at present contribute 60 per cent of the country's gross domestic product, or GDP. "The sector is projected to strengthen its contribution to 70 per cent within the next six years in line with the National Agenda of the UAE Vision 2021," said Al Mansouri.
In the UAE, where some 350,000 companies fall under the SME category, the sector represents more than 94 per cent of the total number of companies operating in the country. "Of this percentage, 73 per cent SMEs are engaged in the wholesale and retail trade sector, 16 per cent in the services sector, and 11 per cent in the manufacturing sector," said Al Mansouri.
Currently, the SME category provides jobs for more than 86 per cent of the private sector's workforce.
Reaffirming the UAE's commitment to create a distinct legislative environment to regulate the evolution of its national economy, the minister said the issuance of Federal Law No 2 of 2014 on Small and Medium-Sized Enterprises and Projects was a quantum leap towards empowering the owners of such projects.
Al Mansouri pointed out that loans granted by banks to SMEs in the country form about 3.8 per cent of their lending portfolio, which is a nominal percentage and not on par with the actual potential of the sector and its large number of employees.
He also stressed the significance of implementing innovation across SME operations, not only as a symbol of excellence, but because it has become a fundamental necessity for countries seeking to strengthen their economic position on a global level.
The minister said that the UAE government will spare no effort in enhancing the capabilities of the SME sector and empowering them to achieve greater results, particularly in the field of innovation.
Speaking to reporters after his inaugural address, the minister said the level of loan defaults by SMEs, as reported by UAE Banks Federation last week, was not a serious concern.
AbdulAziz Al Ghurair, chairman of the UAE Banks Federation, said last week on the sidelines of a conference that the banking sector expects the total SME loan defaults to be between Dh5 million and Dh7 million this year.
Central bank Governor Mubarak Rashed Al Mansoori, who was also at the event, said the government is pushing ahead with plans for a bankruptcy law for the stability of the SME sector.
The governor said the central bank also aims to work with stakeholders to increase institutional support so that SMEs will be in a better position to deal with market forces and have better access to marketing channels, domestic as well as for exports. Another goal is to increase capacity building at SMEs to help them offer better documentation to banks, consistent with internationally accepted accounting practices.
The central bank also seeks to set up a well-designed and credible credit guarantee scheme in order "to decrease risks of default for potential lenders that may jeopardise financial stability," the governor said.
Saqr Ghobash Saeed Ghobash, Minister of Labour, and Mariam Mohammed Khalfan Al Roumi, Minister of Social Affairs, also attended the event.