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28 March 2024

Mena SMEs facing Dh881bn financing gap

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By Staff

Finding finance is a major challenge for the small and medium enterprises in the Mena region with financing gap of nearly Dh881bn as nearly 63 per cent don’t have access to finance, said a senior official of Euler Hermes, a global trade credit insurance company, in Dubai.

Massimo Falcioni, CEO of Euler Hermes GCC, said: “I understand from a recent World Bank/ Union of Arab Banks survey of over 130 Mena banks shows that only 8 percent of lending goes to SMEs across Mena, and even less in GCC countries at 2 percent. This is substantially lower when compared to the middle income countries lending average of 18 percent and high-income countries average of 12 percent.”

MassimoFalcioni, CEO of Euler Hermes GCC

As per this study, access to finance is clearly one of the greatest challenges particularly in Mena where nearly 63 percent of the SMEs do not have any access to finance. The total financing gap for SMEs in Mena is estimated about $210 billion (Dh771 billion) to $240 billion (Dh881 billion).

Falcioni said: “A recent study from DMCC has confirmed this and reported that 45 per cent of its members registered in the Free Zone need substantial funding. Only around 36 per cent have access to funds, and of these, only 33 per cent are fully funded by local banks”.

Falcioni was speaking at a workshop organised to highlight the benefits of financial lines insurance with a focus on SMEs.

The SME sector plays a vital role in the UAE economy with more than 90 per cent of them owning businesses, according to Mohammed Bin Rashid Establishment for SME Development (MBRE). But business analysts see SMEs feeling more pressure to come up with fresh capital to compete in the UAE’s market-driven economy ahead of the 2020 Dubai Expo.

Falcioni said: “To compete in the local, regional and global market, a company has to trade on credit. Over 60 per cent of company assets can be reflected in its receivables and Trade Credit Insurance (TCI) is one of the most effective services offered to SMEs that want to trade and export.

TCI increases rating of a company and also guarantees to protect business against payment defaults.”

Krysta Fox, Director of DMCC Free Zone, said: “With over 8,600 companies currently operating from the DMCC Free Zone, it is essential that we offer our members the right toolkit in order to grow and succeed. Euler Hermes is one of the world’s leading providers of trade credit insurance services and we hope the comprehensive range of tailored solutions we have developed together, will further enhance the ease of doing business for our member companies.”