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Much more can be done to support SMEs, says a new report from Insight Discovery

United Arab Emirates: Monday, January 30 - 2012 @ 13:05

‘SMEs and Aggressive Growth: What are the challenges that need to be overcome?’ identifies the obstacles faced by SMEs and looks at what can be done to support them.

“In this part of the world, many of the entrepreneurs are expatriates, with strong links to other countries. The absence of modern bankruptcy laws across the region means that these people have a strong incentive to leave for good – and quickly – if things go wrong,” said Nigel Sillitoe, CEO of Insight Discovery.

The report is based on an in-depth consultation process with regional experts and SME managers. Partners include Gulf Finance, Grant Thornton and Links Group. Panelists included senior executives from some of our Partners and HSBC Bank Middle East, Envestors and two local SMEs, WMS Metal Industries and Zawya.

Key findings include:

• Regional governments can harness the SME market to create employment opportunities.
• Relative to other parts of the world, the GCC governments do not have tax revenues that can be recycled as assistance to SMEs.
• Upfront costs that new SMEs must bear – such as licensing costs and visa fees are unnecessarily large.
• Office costs and other ongoing expenses are also high.
• As is the case for other businesses, finding suitable managerial talent is also a challenge.
• Although SMEs represent a huge opportunity for banks and financial institutions, SMEs are often seen as being too risky to support.

Above all, greater access to finance is key.
“SME’s make a significant contribution to the economy and to employment, yet they currently account for only 4% of total bank lending. The gap between supply and demand for financing means that many promising SME businesses struggle to fully capitalize on their growth potential,” said Edward Allely, Managing Director of Strategy & Credit at Gulf Finance.

“GCC governments must promote an environment that nurtures SMEs: this is essential to create the large numbers of new jobs that are needed across the region. This will also support the Emiratisation initiatives where the private sector is an integral part of the solution,” said Hisham Farouk, Managing Partner of Grant Thornton UAE.

Because the problems are identifiable, they can be solved. More can be done to promote a culture of entrepreneurship. The regulatory and legal environments can be strengthened further, costs and fees that are set by governments can be reduced and databases and information sources can be enlarged.

The report is based on a leadership roundtable that took place in Dubai in December 2011.

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Monday, January 30- 2012 @ 13:05 UAE local time (GMT+4) Replication or redistribution in whole or in part is expressly prohibited without the prior written consent of Mediaquest FZ LLC.

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