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SMEs to Benefit from New Lending Solutions from UAE Banks

Written by: Bridgewest

SMEs-to-benefit-from-new-lending-solutions-from-UAE-banksAfter several banks have cut lending or increased their charges for small and medium-sized enterprises (SMEs) in the UAE, the Central Bank has intervened and issued a set of rules to make banks start lending to companies once more. At the moment, the new regulations are still in the draft more and can still receive amendments. Foreign investors seeking to open companies in the UAE, can rely on our company incorporation agents in Dubai.

UAE banks to have a SME lending unit

One of the proposals coming from the UAE National Bank is for banks to have units dedicated to providing customized lending solutions for companies the country. This regulation will be possible now that the SMEs have their own growth strategy set out by the government. Based on this strategy, banks should also be able to establish a SME lending strategy and policy. For this purpose, the UAE Banks Federation (UBF) is expected to meet with industry leaders and governmental representatives to adopt new lending strategies and even to establish policies as to the requirements the companies must meet.

Our company formation agents in Dubai can offer information about the current banking legislation.

The UAE will also protect banks from possible defaults

Even if the new lending regulations are adopted, the UAE National Bank will make sure to protect financial institutions against companies defaulting and thus the inability of recovering the amounts lent to these. This way, banks will be allowed to establish their own targets and limits for SMEs contracting loans. Through this limit, the National Bank wants to support both the financial industry, but also the other economic sectors in need of additional support when their cash flow is not sufficient for all their activities.

The slight decrease in the oil prices affected UAE’s economy and the government wants to keep companies injecting their capital in the country instead of going elsewhere, hence its support for SMEs which should account for up to 70% of the country’s Gross Domestic Product (GDP) by the end of 2021.

The banks and the UBF will consult on the new draft regulations and find the best solution to the requirements of the Central Bank. Moreover, banks would also benefit from these rules as they would lower the value of the assets posing risks for them and thus free more capital which could be used for SMEs lending.

For full information on the assistance granted to foreign investors opening companies in the UAE, please contact our company registration representatives in Dubai.

 

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