Dubai has launched a new ratings system for small and medium sized enterprises (SMEs) in the emirate, in a bid to boost their access to capital.
The initiative, called Rate SME, was launched on Tuesday by UAE Vice President and Prime Minister and Dubai’s ruler Sheikh Mohammed bin Rashid Al Maktoum and is being undertaken by Dubai SME – part of the Department of Economic Department (DED) in partnership with The Executive Council of Dubai.
Open to all SMEs in Dubai that have a turnover of between Dhs1m to Dhs200m, the framework will rate businesses between B and A+.
Companies will be rated on the basis of five factors – business performance (turnover/profit), innovation, corporate governance, international expansion and corporate social responsibility (CSR).
Those SMEs interested in participating will have to pay Dhs5,000 and register on Rate SME’s website. They need to have at least one year of audited financial records.
Dubai SME is working with a specialist independent firm to judge the companies and the process of rating will take around three weeks, Abdul Baset Al Janahi, CEO of Dubai SME told reporters.
The initiative – part of Dubai’s Plan 2021 – aims to increase the contribution of SMEs to the emirate’s GDP.
Currently, about 95 per cent of the companies in Dubai fall under the SME category – amounting to about 190,000. They employ about 42 per cent of the workforce and contribute to 40 per cent of the emirate’s GDP.
By joining the ratings system, SMEs will be able to get access to better financing from banks as well as attract investor interest, stressed Janahi.
According to a survey by Dubai SME, most SMEs have limited availability of externally sourced start-up financing – 80 per cent indicated personal savings as the primary source of finance for commencing their business operations.
“The UAE Banks Federation is also working with us on the project, so audited companies have more scope to raise funding from loans,” said Janahi.
“Companies that are rated will also have better prospects of winning government contracts and also receiving payments from public entities on a fast-track basis,” he said.
The best rated SMEs will also benefit from support for international expansion support and capability development.
Dubai SME’s survey found that only 8 per cent of SMEs allocate an annual budget for research and development and 13 per cent implement some level of innovation at the product and/or process level. Also, only 34 per cent of SMEs have a formal organisation structure.
“Our primary aim is to help SMEs become more productive, sustainable and creative,” said Janahi.
By 2021, the ratings system is hoped to increase the number of new SMEs in Dubai to 40,000 and boost SMEs’ overall contribution to Dubai’s GDP to 45 per cent or Dhs220bn.
SMEs are also hoped to provide 370,000 new jobs in the economy.
“We are committed to launching initiatives and implementation strategies to support entrepreneurs,” said Sheikh Mohammed.
“Over time, our economic diversity will build a solid base for Dubai’s post oil economy.”
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