UAE SMEs received $114.3mn trade credit support in 2020

From 2020 January to November Etihad Credit Insurance (ECI), the UAE Federal export credit company has extended $114.3million worth of trade credit support to small and medium enterprises (SME) to support companies maintain their liquidity amid the pandemic driven economic crisis.

The credit support was later converted into $272.2 million worth secured turnover for the firms, following the authority’s aim of accelerating the UAE’s non-oil economy and ensuring business continuity.

“The guarantees helped protect the liquidity of SMEs amidst this challenging economic cycle, assisting businesses in reducing their cost of bank funding and allowing them to request their preferred bank to discount the invoices at a preferential rate,” federal entity ECI said.

Established in 2018, ECI delivers credit guarantees and insurance to businesses to cope up with the political and commercial risks of exporting by giving financing or refinancing for export transactions on behalf of the UAE government.

In April, ECI initiated measures to support exporters affected by the pandemic, particularly for those who face payment and supply chain disruptions with export credit insurance and additional funding.

According to the data from the Federal Competitiveness and Statistics Authority, SMEs hold a crucial role in the UAE’s economy, with their contribution to the country’s gross domestic product estimated at 53 percent in 2019, up from nearly 49 percent in 2018.

“Their delicate lifespan is the reason SMEs are considered as high-risk by financial institutions, leading these businesses to have difficulty getting access to credit,” ECI said.

SMEs are always considered as a risky sector, with only 50 percent of startups surviving to the fifth year of operation and it further drops to 33 percent in the 10th year, as per the US Bureau of Labor Statistics.

“ECI understands the vital role SMEs play in building the nation’s economy that is why we have developed an online user-friendly solution in 2019, named ‘SME Protect’ to allow SMEs in the UAE to trade safely and confidently and gain access to international markets, thereby positioning the UAE as the global hub of trade and export. This will enable SMEs to evolve further and become more resilient to risks and economic situations such as this current pandemic.”

Earlier this month, ECI had entered into a deal with the Israel Foreign Trade Risks Insurance Corporation (Ashr’a) to partner in supporting exports, trade and investment between the two markets, which was a result of the UAE and Israel normalized relations in September.