The UAE lending initiatives for SMEs

Blog Author
Funding Souq Editorial Team
Tech Writer
Mar 22, 2024
Funding Souq’s editorial team comprises experienced finance and investment professionals that are on a mission to fuel SME growth, create jobs, and drive the economy forward. They aim to share their extensive experience and industry know-how to empower entrepreneurs and investors alike.
Mar 22, 2024
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Small and medium-sized enterprises (SMEs) are a growing force in the UAE. They make up more than 94 percent of companies in the country and 86 percent of the private sector workforce. As of mid-2022, there were 557,000 SMEs. That’s expected to jump to 1 million by 2030.

 

Their importance in building a sustainable economy can’t be overstated: SMEs cultivate a national talent pool, attract investment, and project the country’s commerce and branding outward. In the UAE, their rising clout was front and center at Expo 2020 Dubai, which awarded AED 6.8 billion in contracts to SMEs, more than a quarter of all contracts. Today SMEs contribute 63.5% to non-oil GDP.

 

The UAE has a range of incubators, a favorable tax environment, a world-class airport that serves as a regional hub, and one of the region’s busiest ports — in other words, it’s a potent mix of top flight infrastructure and services, perfect for launching a business on to the world stage.  

 

But reaching further afield – namely, global markets – also requires financing. Some 80 percent of UAE startups were launched with personal money. To truly scale up, that’s just not going to cut it. Fortunately, there’s a growing suite of options to connect small and midsize firms with financing. Below are some highlights.

 

1. Dubai SME

 

Dubai SME is the premiere entity supporting SME growth in the UAE. Its facilities have boosted a diverse crop of successful homegrown firms – local favorites like Falcon Coffee Roasters, e-commerce platform Packman, and Al Musanada Drones,


one of the biggest drone stores in the Middle East, are just a few of the success stories. Initiatives like the Dubai SME 100 highlights
top performing SMEs and offers capacity-building, training with international partners, and advisory services to push their businesses to the next level.

 

But what about financing? Dubai SME provides interest-free seed loans of up to AED 1 million to defray startup costs. The repayment period is up to five years – you also get an additional grace period of up to 24 months. The loans are exclusively for UAE-owned and managed enterprises.

 

2. Dubai SME loan guarantees

 

If your SME is a bit further along, there’s still other options. One is the Dubai SME loan guarantee program. Tap a loan from select UAE banks and you can get a 100 percent capital guarantee.

 

The loans run from AED 1 million to AED 3 million, have low interest rates, and allow grace periods for loan repayment to help cover costs and generate profits.

 

In order to be eligible, your SME must be:

       Fully owned and managed by UAE nationals

       Located in Dubai

       Owned by someone between the age of 21-65

 

You can read the full terms and conditions for SME seed loans and loan guarantees here.

 

3. Dubai International Growth Initiative

 

In January, Crown Prince of Dubai Sheikh Hamdan bin Mohamed bin Rashid Al Maktoum announced an AED 500 million initiative for Dubai SMEs eyeing international expansion.

Unlike the Dubai SME program, this is open to all Dubai-based SMEs, even companies not owned by UAE nationals. As part of the initiative, Emirates NBD is providing financing to SMEs at competitive rates. Financing is prioritized for strategic sectors.

 

Similarly, the Khalifa Fund for Enterprise Development is offering up to AED 2 million in medium-term, interest-free loans. This one is only for Emirati entrepreneurs.

 

4. Mohammed bin Rashid Innovation Fund

 

SMEs can also benefit from the Mohammed bin Rashid Innovation Fund. Their credit guarantee scheme provides government-backed credit guarantees to encourage commercial bank lending.

 

The Innovation Fund also offers a host of other services, like business model support, guidance on entering new markets, and other types of capacity building. They explicitly don’t seek an equity stake, so you can maintain full ownership while scaling up.

 

5. Emirates Development Bank credit guarantees

 

Emirates Development Bank (EDB) has also taken the lead in offering credit guarantees to support SMEs as part of EDB’s mandate to allocate AED 30 billion to strategic sectors.To name a few of their partnerships:

 

       EDB announced it will guarantee up to 50 percent of finance facilities extended to SMEs by Abu Dhabi Commercial Bank PJSC (ADCB).

       Ajman Bank is offering up to AED 10 million in financing for SMEs, with 50 percent of the facility either guaranteed or co-lent by EDB. UAE startups meanwhile can tap up to AED 1 million, with 60 percent guaranteed or co-lent by EBD.

       EDB will also guarantee up to 50 percent of facilities lent to SMEs by Emirates NBD, with a maximum of AED 5 million for large SMEs and up to AED 500,000 for smaller companies.

 

6. Other SME loan programmes

 

Other banks in the UAE also offer a host of lending programs for SMEs. You can check out Mashreq Bank’s Secured Business Loan program for SMEs, or First Abu Dhabi Bank’s SME Growth Loan, which offers three-month facilities for working capital and longer term loans for up to four years.

 

References:

Impact of SMEs on The UAE's  Economy 

Entities and programmes supporting SMEs in the UAE

 Dubai SME 100' Programms


Request For Seed Loans


New Khalifa Fund initiative to provide up to $545,000 for Emirati entrepreneurs


Abu Dhabi SME Growth Loan 


Mashreq Bank's Secured Business Loans


Disclamer:
"Funding Souq Limited (DIFC) is regulated by DFSA. The post is for educational purposes only and the Firm does not directly or indirectly provide these services"

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