KSA عربي
KSA عربي
Global عربي
When it comes to scaling up your SME, access to capital is everything. But all that capital isn’t just going to arrive, no questions asked. Even as crowdfunding platforms fill some of the financing gap, there’s a lot of work that SMEs can do, on their end, to win investor confidence and keep funds flowing in.
For new investors – who have the world over to choose from when it comes to parking their money – strong compliance is everything. When yield hungry investors see that companies are making strong commitments to regulatory standards, it sends a signal that this is a safe place to grow their money.
In this post we’ll cover everything an SME must know about compliance, and how this can help lock down new investment.
If you’re an SME in the Gulf Arab region, there’s never been a more critical time to get up to speed on regulatory compliance. That’s because in recent years, a raft of changes are driving a diversification away from oil as Gulf states look to rapidly build out a sustainable economy, much of it on the back of SME growth.
In just the last few years, the UAE introduced both federal corporate tax and small business relief. Qualifying for the latter of course, requires maintaining proper financial records and filing returns – careful compliance, in other words. In Saudi Arabia, an updated companies law is similarly meant to help SMEs.
To benefit from these fast-moving changes, SMEs need a multi-front compliance effort. That means following the latest on tax and employment laws, rules on data protection, sector-specific licensing, and financial reporting. Each area of compliance comes with its own authorities, deadlines, and at times, penalties.
Every sector has its own regulatory standards. But generally speaking, there are several core areas all healthy companies should follow, especially if you’re courting capital. Here’s the highlights:
International Financial Reporting Standards (IFRS): these are global rules that call for transparent accounting. It makes financial statements comparable across borders, helping foreign investors understand what’s going on.
Anti-Money Laundering (AML):To prevent money laundering and other malpractice, SMEs must follow AML rules in line with the Financial Actions Task Force. That can mean registering on a platform like the UAE’s goAML to report suspicious transactions.
Know Your Customer (KYC): This means verifying customer identities and keeping customer records for extended periods, as well as verifying Ultimate Beneficial Ownership (UBO), or identifying individuals with significant stakes in a company.
Data Protection: Check your jurisdiction’s latest legislation on what’s required to protect your customer’s data. For example, the UAE passed a federal decree on personal data in 2021 and it comes with penalties of up to AED 5 million for non-compliance. Saudi Arabia passed a similar law in 2024.
ISO 9001: These are international standards that ensure products and services meet a certain quality threshold.
ISO 27001: This is a standard for information security management to help organizations protect information assets.
Why is compliance so important for investment? In simple terms, compliance reduces risk. This makes an SME more attractive, especially when an investor evaluates it based on risk-adjusted return.
In the Gulf, increased compliance appears to be paying off. The UAE leaped to 8th place (from 18th) and Saudi Arabia to 14th (from 28th) on Kearney’s 2024 Foreign Direct Investment Confidence Index, a survey of global business executives that ranks countries by how likely they are to attract investment.
It’s difficult to unpack precisely how much of the improvement comes down to compliance, but without it, it’s difficult to imagine such success. When financial statements are below audit quality, or financial reporting is not happening on a timely basis, these are red flags, and they can derail a promising investment deal. Strong compliance will speed up the due diligence process and investors will have trust in the data they’re being shown.
All this talk of compliance isn’t merely academic. Real companies who followed this strategy have seen the pay out. Here’s two examples:
Lendo: Lendo is a Riyadh-based debt crowdfunding platform. At first, it operated inside SAMA’s regulatory sandbox, before getting a full license from the Saudi central bank. Its careful adherence to compliance won it Series B funding of $28 million led by Sanabil Investments, a PIF subsidiary. Then, in January 2025, a major milestone: Lendo secured a $690 million facility led by J.P. Morgan, a major signal of confidence from a global financial institution.
JUMO: Jumo is a South Africa-based fintech that creates digital financial products for the unbanked. It has built its business across multiple African countries, leveraging its strong compliance in each market to get regulatory licenses and win investor trust. Its backers include Goldman Sachs, Fidelity Management and Visa.
Compliance needs to be thought of as a continuous process, not a one-off. It’s not enough to simply comply quietly either. For your SME to win trust, it should constantly communicate its proactive compliance strategy. You’re selling a story of reliability. Besides, compliance requires a lot of effort, so you want to take credit.
What does it mean to have proactive assurance? Things like:
Annual audited financial records
Third-party certifications
Clean document trails
Independent compliance audits
A designated compliance officer
Given how rapidly regulation can change, especially in the Gulf, it’s worth having a comprehensive strategy. Here’s some steps you can take to make it simple:
Begin with a compliance gap analysis to determine precisely which regulations apply to your business.
Develop documented compliance policies. The should cover:
Financial reporting
Data handling
AML/KYC obligations
UBO disclosure
Assign compliance responsibilities clearly
Smaller SMEs may consider a fractional compliance officer
Schedule regular internal reviews and third-party audits
When it comes to compliance, the biggest obstacle is finding the resources to keep up. Some regulations are simply difficult to comply with, often requiring time and company resources to pull off. In Saudi Arabia and the UAE for example, mandatory national hiring targets carry increasingly higher fines, but tracking down local talent to fill specific roles isn’t always easy.
And simply keeping pace with evolving rules can be a full-time job. VAT regulations can change overnight and require a different approach. And SMEs often exist in several spaces at once (a free zone, with its specific rules, and broader federal rules, for example). The varying standards can feel inconsistent and chaotic.
But not complying will make things worse. Penalties only seem to be going up.
If all of that sounds daunting, rest assured, there are solutions. For one, if you're a resource-strapped SME, you might consider outsourcing your compliance. There’s a growing crop of competent firms that offer outsourced talent for specific roles like money laundering reporting, data protection officers, and general compliance officers.
Many governments meanwhile are doing their part to reduce the cost of compliance. In Saudi Arabia, initiatives like the Makken Program help fintechs by offering subsidised services that can help with compliance. And SAMA’s regulatory sandbox offers a way to test services before jumping into full licensing, which can save money.
There’s also online services, so-called RegTech, that can streamline compliance and reduce costs in areas like KYC, AML monitoring, and auditing.
Regulatory compliance builds investor confidence by showcasing that a business has accurate, timely financials, manages risk, and operates transparently, qualities which reduce risk and can accelerate a funding decision.
Key compliance requirements typically include financial reporting standards, corporate tax registration, AML/KYC obligations, data protection, and sector-specific licensing.
Adherence to regulations signals to investors that the company has strong governance and a management team that can be trusted with investor funds, helping speed up due diligence.
It is increasingly unlikely for an SME to win funding without proper compliance, as banks, alternative lenders and private investors all require audited financials and regulatory documentation before committing capital, particularly as the size of funding scales up.
Regulatory assurance means actively documenting and showcasing ongoing compliance measures, a move that will send positive signals to investors, speed up deals, and build credibility.
Disclaimer:
This post is for educational purposes only, and does not constitute investment advice or a solicitation to take any financial action. It should not be relied upon when making investment or financing decisions.
