UAE drafting law for SME financing

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UAE drafting law for SME financing
The UAE and World Bank are drafting new legislation that would help the small and medium-sized firms in gaining access to greater financing options. Photo-Ken Teegardin

The UAE is closely collaborating with the World Bank to draft new legislation that would help small and medium-sized firms in gaining access to greater financing options.

Under the draft law, these firms would be able to use assets such as machinery, to back loans. The International Finance Corp, a unit of the World Bank, is working with the Emirate to prepare the law to create a registry of movable assets. Once a record of the assets is available, they may be used as collateral to gain access to capital from lending institutions. In case the small and medium-sized enterprises (SME) default on a loan, the financial institution could exercise their right to confiscate these assets.

Speaking to a media event, Mouayed Makhlouf, the IFC’s regional director for the Middle East and North Africa, said; “You can only mortgage land once and a building once – so for these small businesses, after that, what else can they put up.” Besides the UAE, seven other nations in the Middle East and North Africa region are also working with the IFC to draft a law for movable assets. These countries include Morocco, Tunisia and Jordan, which are home to several high potential, SME’s in a rapidly expanding market.

The draft law is expected to be a game changer for the UAE marketplace as it would help the small businesses to overcome the challenges to securing a loan to expand business operations. Access to financing options for these firms is hindered due to a number of reasons, which include their size and lack of financial history.

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