Emiratis can obtain financing up to Dh420,000, backed by 50 per cent capital guarantee.

Small and medium enterprises in Dubai that are fully-owned and managed by Emiratis can now obtain financing of up to Dh1 million backed by a 100 per cent capital guarantee and financed by Dubai SME's financial arm, the Mohammed bin Rashid Fund.

Dubai SME, the agency of Dubai Economy mandated to develop the SME sector, said on Sunday SMEs in Dubai, in which Emiratis have a 50 per cent ownership and management rights, can obtain financing of up to Dh420,000, backed by 50 per cent capital guarantee.

The guarantee provided by the fund, through its guarantee pool of Dh20 million, contributes to motivating investors to participate in lending and supporting the SME sector that contributes an estimated Dh199.6 billion to the total gross value-add of the Dubai economy.  

In the event of a particular company defaulting on repayment, the fund would take care of the outstanding capital and return the amount to investors, Dubai SME said in a statement.

"The valuation of a company applying for the loan improves once it is supported by the fund, which enhances confidence among individual and corporate investors," it said.

Saeed Al Marri, deputy of CEO of Dubai SME, said the entity is committed to providing innovative financing solutions to SMEs in line with the directives of the leadership to support the business continuity and SMEs in particular, which constitute the majority of companies operating in the emirate.

SMEs, representing 99.2 per cent of the number of establishments in Dubai, contribute nearly 50 per cent of the emirate's gross domestic product while accounting for 52 per cent of the total workforce in the emirate. The total number of SMEs in Dubai is estimated at 151,875.

Dubai SME, which has allocated Dh25 million to the capital guarantee program that is managed by the fund and the Beehive platform, said beneficiaries of term loans under the capital guarantee scheme are given a three-month payment holiday at the beginning of tenure, following which repayments should be made as per the schedule specified.

"For working capital loans, the repayment period is 150 days and rates start at 0.8 per cent, offering investors attractive returns. The capital guarantee includes only term loans, not working capital loans," it said.

A total of 220 loans have been registered on this program since the beginning of 2020 with a value exceeding Dh19 million, compared to 280 loans in 2019 valued at Dh16 million.

Dubai SME also announced the launch of an innovative platform in partnership with Beehive to give individuals the opportunity to invest in SMEs and reap remarkable returns while also enabling entrepreneurs and small businesses to consolidate their gains and aim for sustainable growth.

Dubai-based Beehive P2P Limited is the first financial technology platform to engage in peer-to-peer lending activity in the Middle East and North Africa region and is regulated by the Dubai Financial Services Authority at the Dubai International Financial Centre.

"The platform uses innovative technology to link companies seeking fast and affordable financing to suitable investors. Starting at a minimum investment of Dh100, the platform has become an incentive for investors to financially support local projects, thereby earning profits and contributing to overall economic growth," Dubai SME said.

"The Beehive platform provides an innovative crowd-funding solution whereby investors can participate in supporting small businesses in a safe and secure way, beneficial for the investor and the SME," said Al Marri.

SMEs seeking financing through Beehive can register on the www.beehive.ae website, after which the company would be subject to an eligibility test and credit assessment.

"The SME will have to provide bank statements, personal data of the owner and its audited financial statements," Dubai SME said in a statement.

"Successful SMEs will be notified on the loan amount they could obtain, tenure and the profit rate applicable. The SME can then proceed with the loan request, and the funding opportunity will be made available to investors via the platform within two to five working days. Generally, the loan amount is pooled from contributors within a maximum of two weeks. A single company may obtain an additional loan after the first loan is paid off," Dubai SME said.

In addition to the minimum investment threshold of Dh100, an investor is also given the option to choose the loan or company to invest, it added.

"The expected annual return and profit percentage for the investor is about 10 per cent of the investment value, and it depends on the term of the loan, which could be 12, 24 or 36 months," Dubai SME said.

"Profits are deposited into the investor's account every month, and the investor can withdraw their investment any time, provided it is not linked to a specific loan. In the event of a contribution to a specific loan, the investor can put their investment for sale on the secondary market or wait for the loan repayment period to expire. The investor can also contribute to more than one loan at the same time."

 (This article was previously published by Khaleej Times)