Abu Dhabi Government Support For SMEs Demonstrates Their Importance To UAE

Abu Dhabi Government Support for SMEs demonstrates their importance to UAE

Last year, the government of Abu Dhabi announced that they would allocate 15% of annual procurement spending and contracts to micro, small and medium enterprises (mSMEs) to increase the segment growth rate and offset the impact of the Covid-19 pandemic on the mSME sector. The primary goal of the initiative was to drive the growth of small businesses in Abu Dhabi as they are considered to be the backbone of the economy. Several other measures were also taken to help the mSMEs including the suspension of bid bonds and waivers of performance guarantees for projects worth up to AED 50 billion (USD 13.5 billion), which will be introduced from 2021 for mSMEs and Emirati entrepreneurs.

Economic Stimulus Package – SMEs

Small and Medium Enterprises (SMEs) are a key component for Abu Dhabi’s business landscape as they account for more than 98% of the companies in the Emirate. They contribute approximately 29% of the Gross Domestic Product (GDP) and 44% of the non-oil economy. Therefore, the government aims to roll out an economic stimulus package to help soften the impact of the coronavirus on the SMEs and the economy.

The economic relief scheme includes 16 initiatives aimed at reducing the costs of living and supporting businesses in the emirate. Abu Dhabi’s Department of Finance collaborated with three of the emirate’s top lenders to expand the SME Credit Guarantee Scheme introduced as part of Abu Dhabi’s economic stimulus. Under the deal with Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank and First Abu Dhabi Bank, the government will guarantee up to 80% of the value of the credit guarantee scheme to SMEs.

The initiative provides SMEs with wider access to renewable financing options for working capital loans for a three-month duration and term loans for up to four-year duration to support further investment in Abu Dhabi. The UAE, also provided AED 282 billion (USD 77 billion) monetary support for the SMEs, providing zero interest funding to banks to boost lending growth in the country. Various other initiatives such as discounted utility bills and waivers of fees to support the economy were also taken.

Investment opportunities in Abu Dhabi

The Lenders in UAE have already provided a comprehensive package to reduce financial distress of SMEs that are operating in the country, through reduced costs and fees, loan deferrals and reduced interest rates and processing fees. UAE Central Bank (CBUAE) urged lenders to support their private sector clients and individual borrowers to cushion the impact of Covid-19. The CBUAE has released 60% of AED 50 billion (USD 14.5 billion) Targeted Economic Support Scheme. Abu Dhabi and UAE will continue to support the SMEs and mSMEs that are operating in the Emirates creating a mutually beneficial platform for the economy and the businesses.

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Author: Waqas Siddiqui
As a research consultant, I am passionate about supporting businesses in successfully expanding in the UAE and Gulf region. I can be reached at waqas@researchkonnection.com for research inquiries.