Excessive caution? Why 'perfectly legitimate' SME's are struggling to find financing in the UAE

Published October 29th, 2014 - 04:55 GMT
Banks all over the world are being excessively cautious as regulators have been imposing huge fines that hit their bottom line.
Banks all over the world are being excessively cautious as regulators have been imposing huge fines that hit their bottom line.

One of the biggest problems facing small and medium enterprises starting a business in Dubai these days is opening a local bank account. ArabianMoney heard from one small software company yesterday who only made it on the seventh attempt, with RAK Bank.

Banks all over the world are being excessively cautious as regulators have been imposing huge fines that hit their bottom line. Better safe than sorry is the name of the game. So at a time of record low interest rates it can still be very hard to actually borrow money if you are a smaller company or a sole trader.

Bernanke rejected

Former Fed chairman Ben Bernanke was famously turned down for a home loan last month because he no longer has a full-time job. No matter that he can earn $200,000 for a single speech and only wanted to borrow around $850,000. If a man of his unimpeachable credentials can’t get a bank loan who can?

New Dubai SMEs actually can’t do business or get a trading license without a bank account, so these are not going to be new SME employers at all. That’s a shame because SMEs are how cities like Dubai have grown from almost fishing villages to ultra-modern metropolises is the adult lifetime of its still very youthful ruler.

So where should SMEs be turning now? We’ve mentioned RAK Bank. We also hear that the doors are still open at Mashreq, Dubai Islamic Bank, Emirates NBD and the rising stars of Abu Dhabi like ADCB, UNB and FGB. Profits from the last two banks reported yesterday.

FGB profits surge

Formerly known as First Gulf Bank, FGB said its third quarter income rose 20 per cent to $392 million while UNB was up 22 per cent to $150 million for the same period. UAE local banks have been reporting higher than forecast growth this year on the back of a local economic recovery.

However, the growth of those profit in future years is going to be less than it could be if the banks don’t take on more SME customers. Still at the moment it is mainly the international banks that are losing out as we reported yesterday with Standard Chartered Bank and HSBC closing SME accounts under US regulatory pressure (click here).

SMEs have a great deal to overcome if their businesses are ever to grow. Opening a bank account should not be one of them.

 

Copyright 2022 Peter John Cooper All rights reserved

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