Guide to funding for SMEs in the UAE

Wide range of financing sources available
Guide to funding for SMEs in the UAE
Startups and small business contribute significantly to the UAE economy

The availability of funding for SMEs plays a pivotal role in the growth and development of any economy. Accordingly, the focus on supporting new ventures and small businesses has increased in recent years in the UAE.

The Ministry of Economy states that SMEs make up over 94 percent of all companies in the nation. Because of this, SMEs have become a major contributor to the UAE economy.

However, securing financing is a common challenge for SMEs. Fortunately, the UAE offers a plethora of funding options. With a diverse range of possibilities to choose from, SMEs can find the right financial support to launch, develop, and expand.

Read: UAE: Entrepreneurial Nation concludes Phase I with AED 20 mn support for SMEs

Importance of SMEs

  1. Employment creation. SMEs in the UAE significantly enhance economic stability by employing over 86 percent of the private sector workforce. Consequently, it has been instrumental in boosting employment rates.
  2. Contribution to GDP. In the UAE, SMEs critically support economic vitality by contributing over 60 percent to the nation’s GDP as of mid-2020.
  3. Innovation and adoption of technology. With a knack for adapting to market trends and embracing new technologies, SMEs help drive innovation and growth. Moreover, these strategies bolster the UAE’s tech sector and uphold its industry leadership.
  4. Economic diversification. Startups and small businesses help reduce the risks of dependency on dominant industries. For instance, 73 percent of SMEs in the UAE operate in wholesale and retail; 16 percent in the services sector, while 11 percent belong to the industrial sector.

Funding for SMEs in the UAE

Funding for SMEs is an essential part of the UAE’s growth strategy. There are a few different ways to go about it, including:

Local funding programs

Local funding programs offer financial assistance and underpin entrepreneurial activities, thereby promoting business stability and scaling capabilities.

Notable local funding programs for SMEs in the UAE include:

  1. Khalifa Fund. Backed by the Abu Dhabi Government, the Khalifa Fund provides financial support to SMEs owned by UAE nationals. Emirati entrepreneurs are aided through a gamut of services, such as guidance on business strategy as well as technical advice and support, among others. However, the fund also offers non-financial support to expatriates in the UAE, further enriching the nation’s SME landscape.
  2. Dubai SME. Similarly, Dubai SME functions as a comprehensive platform for supporting Gulf Cooperation Council (GCC) nationals in establishing SMEs in Dubai. It offers guidance on business planning, launch, and growth. To alleviate startup costs, it provides seed loans of up to AED1 mn. In addition, it extends non-financial aid to expatriates in Dubai, which further enhances the UAE’s SME ecosystem.

Angel Investors

Angel investors uniquely impact the UAE’s SME environment by financing small businesses and funding early-stage ventures with the potential to innovate.

Their contributions often combine capital, mentorship, and business network access, enriching the entrepreneurial ecosystem.

Around 200 angel investors reside in the UAE, with 33 percent actively investing each year. They typically offer USD50,000 to USD300,000 for a 15 percent to 20 percent equity stake in the target business. Others invest more, depending on the potential of the venture.

Institutional investors

Institutional investors, such as banks, form an enduring financial backbone for the SME sector. They provide conventional financing methods, offering loans, credit lines, and other financial products.

Here is a list of banks that offer financial support for SMEs:

  1. Emirates National Bank of Dubai. Emirates NBD caters to SME customers with a comprehensive suite of banking services like transactional banking, cash management, loans and more.
  2. Emirates Development Bank. This bank prioritizes SMEs in areas like advanced technology, renewables, food security, healthcare, and manufacturing. SMEs can apply for business loans up to AED5 mn within 5 days.
  3. Mashreqbank. This bank introduced a Small Business Loan Program to support SMEs. This initiative has empowered SMEs to in many ways, especially in expanding their businesses.
  4. First Abu Dhabi Bank. The SME Growth Loan from this bank is aimed at promoting affordable lending to SMEs over a three-year period.
  5. Abu Dhabi Commercial Bank. It commits itself to financing SMEs, including three-month working capital loans and four-year term loans.

Final thoughts

Funding for SMEs helps make the UAE a thriving business ecosystem, supporting both local and expatriate entrepreneurs.

To secure the right funding for SMEs, in-depth planning and strategic insight are prerequisites.

Leveraging the UAE’s rich SME funding and support system can drive your venture’s growth and foster future economic development.

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