Are we right to be so positive about the future for our sector?

In October 2013, a survey from the Association of Chartered Certified Accountants and Institute of Management Accountants found UAE SMEs to be the most confident in the world, with high and improving confidence levels in their prospects.
The survey’s authors were particularly struck by this. “The thrust of confidence amongst UAE SMEs comes despite far from perfect global business conditions,” said Rosana Mirkovic, ACCA’s head of SME policy.

“SMEs in the region face greater business pressures than large corporates: a pattern reflected on a global scale. The key issues for UAE SMEs, as elsewhere, are decreased income and increased costs, plus access to finance and securing prompt payment from customers, which can affect the cash flow small business need to survive.”

Nonetheless there is an enthusiasm and optimism here that other regions don’t come close to matching. What factors are driving this, and how strong are they? We’ve identified four.

Firstly, the negative economic pressures listed above may be less pronounced here than elsewhere.

They are felt by our SMEs, that’s undeniable – but compared to other parts of the world, they’re less of a hindrance. In the survey, many SMEs around the world said they’d recently experienced such negative pressures, but those in the US and UAE had seen the least severity. These two regions were also most likely to meet negative pressures with a positive response – SMEs in the UAE for example, are twice as likely to turn challenges into solutions as those in central and eastern Europe are. It’s also the case that SMEs are being increasingly helped with these issues – for example, access to finance is something that Mashreq tackles for many SMEs, through our comprehensive range of trade and working capital solutions.

Secondly, there is more government support for the SME sector here than in many other regions.

Our policymakers are banking on smaller businesses to play a key role in the development of the Emirates, which explains the push to help develop local entrepreneurs. For example, a new SME draft law, approved in June, will promote the sector once passed.
This institutional desire and support is recognised by SMEs here. The survey asked SMEs to rate their local government’s policies over the past three quarters. The UAE – along with Singapore and Canada – was one of only three regions where positive opinions outweighed negative ones.

Thirdly, there’s a strong culture of entrepreneurship in the UAE.

This is perhaps less tangible than the previous factors, but there is a general sense that this is a young, dynamic region, where ideas are welcome, anything is possible and the future is there to be seized.
Planned diversification from the foundations of the oil and gas economy has contributed to this, creating a sense that new sectors and innovation are the way to go. This contrasts with other global regions, where the focus is more on rebuilding sectors after the recession, or on looking to specialise. As a result, there are at present some 300,000 SMEs in the UAE, accounting for 92% of our total companies and 86% of the private sector workforce – impressively high numbers.
This spirit is also seen in events such as Startup Weekend, held in December’13 by a group of entrepreneurs called Young Arab Leaders with support from Abu Dhabi’s Khalifa Fund.

Fourthly, wider economic upturns are impacting the SME sector.

The region’s stock markets were among the world’s best performers in 2013. The region’s property sector saw the globe’s highest returns in 2013. Many of the debts accrued during the downturn are now being repaid, and many of the projects put on hold are now being rekindled. And Dubai has just won the Expo.

With a general picture like this, it’s natural that the SME sector is positively impacted. The general sense of a region that’s once again on the way up is trickling down from all levels.

If these are the four main pillars behind our positivity, how confident can we be in them? The latter two – entrepreneurial spirit and wider positivity – seem almost certain to continue. The first two – economic conditions and government support – are those where predictions are less possible. Many sectors commentators feel they are connected, and that measures such as a bankruptcy law would be a major help.
However the wish of many SMEs is simply to see their agenda receive as much attention as others. That’s part of the reason why Mashreq is launching this portal. To us, the SME debate is one that needs closer attention, more exchange of ideas and views, and more involvement from the region’s banks. To put it simply, we’re here. So let’s talk.

“The opinions expressed within this article are generic. Mashreq is not responsible for the accuracy, completeness, suitability or validity of any information on this article. The information, facts or opinions appearing in this article do not reflect the views of Mashreq. Mashreq does not assume any responsibility or liability for the same.”