The Abu Dhabi-based Emirates Development Bank has signed an agreement with Dubai Islamic Bank, the largest Sharia-compliant lender in the United Arab Emirates, to disburse AED 200 million (about $54.4 million) to small and medium-sized enterprises in the country. The focus will be on SMEs in priority sectors, as well as businesses and startups that are in need of funding assistance.
Under the terms of the agreement, the Emirates Development Bank provides a credit guarantee to the SME customers of Dubai Islamic Bank. An SME could hope to obtain up to AED 10 million in financing, with half of this amount being guaranteed by the Emirates Development Bank. SMEs in manufacturing, infrastructure, healthcare, technology and food security will be given priority.
The move is believed to benefit small and medium enterprises that are at least 51% owned by Emiratis. Prior to June 2021, every business that was set up on the mainland of the United Arab Emirates [that is to say, not in a free zone or offshore] required a Local Partner – an Emirati or a company wholly owned by Emiratis – to hold 51% stake in the venture.
The United Arab Emirates has increasingly been looking to diversify away from oil, and Dubai has taken the lead in this regard. Today less than 1% of Dubai's revenues come from oil. Ahmed Mohamed Al Naqbi, the Chief Executive Officer of Emirates Development Bank, said that his organisation fully supported the United Arab Emirates' economic diversification strategy.
He added further that he the deal was aimed at bridging the funding gap for SMEs in the United Arab Emirates, especially those who operate in key economic sectors. Small and medium-sized enterprises make up 94% of all companies in the United Arab Emirates and employ more than 86% of the workforce in the private sector.
Over the next five years, the Emirates Development Bank will provide a massive AED 30 billion (around $8.17 billion) in financing to support small and medium-sized enterprises, in addition to the United Arab Emirates' industrial sector. The United Arab Emirates plans to more than double the size of the industrial sector to AED 300 billion (approximately $81.7 billion) by 2031.
The Emirates Development Bank has signed similar agreements with other banks such as RAK Bank, Commercial Bank of Dubai, National Bank of Fujairah, National Bank of Umm Al Quiwan and Emirates NBD. Established in 2011, the Emirates Development Bank aims to add 25,000 jobs to the economy by lending to 13,500 SME and large companies over the next five years.