Obstacles in the growth of SMEs in UAE

Article Type: General

Provided by, Content Partner for SME Knowledge UAE

Small and Medium Enterprises are gaining immense popularity in today’s economy because they are relatively easy to establish and operate. They offer numerous benefits in enhancing the performance of the economy and setting it on the ladder of growth.  According to the statistics issued by the Dubai Chamber of Commerce and Industry, SMEs contribute 86% of jobs in the private sector and 60% to the country’s GDP. These contributions have a huge and remarkable effect on the country’s growth as employment and GDP are known to be the key drivers of growth in any country. However, there are certain factors which are hindering the growth of SMEs in the UAE region which are discussed as follows.

Financing Issue

The biggest challenge for the development of SMEs in UAE is the availability of finance. Finance is an essential component for the development as well as running smooth operations of any company and hence its availability is a prerequisite which UAE should meet to ensure the growth of SMEs and to fully benefit from them. A survey conducted by Abu Dhabi Council of Economic Development showed that 67% of the entrepreneurs said that the basic deterrent in their setting up business was the unavailability of loans and credit from the banks they approached. Banks are reluctant to provide funds to new businesses as the risk of failing is high.

Ineffective Business links

SMEs act as pillars and foundations for the growing economy like a house is built on the pillars; similarly an economy can prosper and flourish if there is a strong base of SMEs in the country. However, the challenge which UAE faces in setting this base is poor connectivity and networking. The businesses are not closely knitted and connected together which could provide the support to the new and upcoming SMEs. Thus, hampering the overall process of SMEs development.

Lack of management skills

Another factor which acts as an obstacle to the growth of the SMEs is the lack of management skills of the entrepreneurs. As the businesses grow in size, broad skills set are required to manage the operations and to retain/manage the employees. Entrepreneurs usually do not have such management capacity to tackle issues of various sorts and to come up with innovative strategies to further grow the business and increase organizational performance.