UAE’s apex bank issues guidance to support SMEs in the region

By Ashika Rajan, Trainee Reporter
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Central Bank of UAE
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The Central Bank of the UAE (CBUAE) has released a new regulation to enable licensed financial institutions (LFIs) to use best practices when dealing with small and medium enterprises (SMEs).

The new rule’s goal is to make it easier for SMEs to get access to financial products and services.

Mr. Abdulhamid Saeed Alahmadi, Governor of the Central Bank of the UAE remarked that “the UAE government has placed considerable emphasis on developing the SME ecosystem and removing obstacles for a transparent, entrepreneurial, and innovative SME sector in the UAE, which has good access to various financial sources.”

“To sustain this momentum, the CBUAE aims to ensure that SMEs enjoy the highest business standard when interacting with licensed financial institutions, in line with our new consumer protection mandate,” Mr. Saeed Alahmadi further added.

SMEs account for more than 90 percent of all businesses and recruit more than half of the workforce, but they also face financial challenges. In the Middle East and North Africa (MENA), the “finance gap” ratio of available funding to the total demand is 88 percent, the highest of any region on the planet.

Efforts to boost SMEs’ access to finance in the UAE have been stepped up, with the Abu Dhabi government launching an SME Credit Loan Guarantee Scheme in April last year to ensure businesses had access to available funds as the pandemic struck. The apex bank said that its new regulations provide market conduct standards for lenders dealing with SMEs, improve governance over the types of products sold to them, and encourage “responsible financing practices and appropriate risk disclosure.”

Lenders must complete the opening of a bank account for SMEs within three days under the new legislation, provided that the required degree of due diligence on money laundering and terrorism financing laws has been completed.

Banks are expected to report the reasons for any denial of a credit application and should refrain from placing undue pressure on SME customers when collecting debts. Lenders must also have independent and appropriate mechanisms in place to comply equally and transparently with complaints from SMEs, according to the new regulations.

This legislation was introduced by CBUAE after the implementation of a new financial consumer protection regulatory structure earlier this year, which aimed to improve the quality of information given by financial institutions to consumers and resolve disputes more quickly.

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