Survey suggests UAE SMEs are struggling for financing

Small and medium enterprises in the UAE are struggling for financing after business confidence reduced in the fourth quarter.

In a survey by Gulf Finance, SMEs reported greater difficulty in both finding loans and getting paid.

Many also said that had pulled back their expansion plans and stopped hiring.

“The last quarter of 2015 witnessed a significant increase in negative sentiment sweeping the SME market,” said Gulf Finance chief executive David Hunt. “After a strong start of the year, UAE SMEs rapidly struggled to raise and collect money, pushing plans to recruit, launch products or open new outlets aside.”

UAE banks have become more reluctant to lend in recent quarters due to the impact of low oil prices on economic sentiment. SMEs have also been shying away from borrowing, according to the report.

At the end of last month, it was reported that United Arab Bank would be winding down its SME unit due to rising provisions last year from business owners and others fleeing the country.

Loan impairments from SMEs were expected to range between Dhs 5bn and Dhs 7bn for 2015, UAE Banks Federation chairman AbdulAziz Al Ghurair said in November.

Nearly three quarters (74 per cent) of respondents to the Gulf Finance survey in Q4 2015 reported difficulties in their ability to raise money compared to almost half (48 per cent) in the third quarter.

Those reporting problems in collecting payments also rose from 15 per cent in Q3 to 29 per cent in Q4.

Meanwhile, around half of SMEs said they would maintain or reduce their headcount.

As oil prices hover around $30 a barrel, a 70 per cent decline since mid-2014, these difficulties are expected to continue. SMEs account for 86 per cent of the UAE’s private sector workforce, according to Ministry of Economy estimates.

“As we’ve entered 2016 it is clear that the UAE’s SME market will continue to face similar challenges as seen in the second half,” Hunt said. “With a low oil price, slowing economy activity and lower levels of liquidity, SMEs are likely to continue to feel the impact on their business activities.”