SMEs have widely been recognized as the engine of growth in all economies around the globe. In the context of the UAE, SMEs account for over 94% of companies in the country, provide employment to over 86% of the total private sector workforce, and constitute more than 60% of the country's current GDP.
Despite their undeniable importance to the economy, a common perception is that SMEs receive disproportionately less support from banks compared to their larger corporation counterparts. There is no question that more can be done to ensure that SMEs have better access to a support system, as well as credit from the financial sector. While financial institutions understandably hesitate on capital lending to SMEs, given the often higher-risk profiles associated with them, there are several ways to help them grow beyond a role that is merely transactional.
Simplifying the account opening process
In the banking industry, one of the biggest pain points for startups when banking is opening a business account, as it is an expensive and lengthy process, with reams of documents required at the outset. In some cases, a corporate bank account can take new firms at least a month and up to three months to open. Because this is such a challenging process for entrepreneurs, it can often lead to startups looking elsewhere to set up their businesses as they feel like they have no control.
A simple solution for banks is to introduce basic accounts with a digital end-to-end account opening process. This can reduce the time and manual labor involved in opening an account, and also provide entrepreneurs with a process that is more transparent.
At Mashreq, we recently launched a new digital proposition called NeoBiz that is designed to meet the demands of SMEs. This not only delivers customized and specifically-tailored digital products for SMEs, startups and young businesses in the country, but also offers key services such as digital onboarding, transparent and simplified products, a digital assistant and full transaction capabilities online. It is initiatives such as these that can reduce unnecessary distractions for SMEs and enable them to focus on the most important thing to them—growing their business.
Providing support through partnerships
Support can also be made available if SMEs share data openly with financial institutions so they can help to identify the bottlenecks and pain points, and develop products and services that address these issues. Banks can analyze the state of finances and the overall business of their SME customers to provide them with effective consulting services. There are several innovative banks around the world that offer comprehensive consulting services for marketing, staff recruitment and business restructuring.
Leveraging the latest technologies
Fintech companies are changing the financial services industry in terms of customer experience and innovation, and this is another area from which SMEs can vastly benefit. From accounting solutions, to cloud computing to crowd lending, fintech can help SMEs to streamline their operations and, more importantly, cut costs and even raise cash. The Startupbootcamp Fintech Dubai Accelerator, which is the result of a partnership between DIFC and leading financial institutions, including Mashreq Bank, recently had its second round of calls for fintech startups to join the program. While this is specifically for fintech SMEs, there is no reason a similar initiative cannot be rolled out for other SME businesses.
Continued support in managing cashflow and debt
Then there is the biggest challenge that SMEs face—managing their cash flow. Dubai government recently announced that SMEs would be paid for their services within 30 days instead of the usual 90. From a liability perspective, bodies such as the UAE Banks Federation have also actively helped to restructure any debts owed by struggling entrepreneurs. Moves like this go a long way in ensuring the financial health of SMEs, allowing them to prosper and contribute further to the economy.
The SME ecosystem is ultimately the lifeblood of any economy, and supporting them must remain top of the agenda, for governments, regulators, financial institutions and other large organizations alike.