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The Market Conduct System ... a step forward

Sami Al Riyami

reyami@emaratalyoum.comsamialreyami

March 23, 2021

Medium and small enterprises represent the backbone of the economy in most countries, and the UAE is not an exception. Rather, this category of projects and businesses is of double importance in the Emirates, as it constitutes approximately 93% of the total companies registered in the market, and the largest proportion of employment is concentrated in them.

Over the past years, the state provided a strong legislative and logistical structure, with which it ensured ease of doing business, and secured workers' rights in terms of salary, housing and health insurance, so the local market became the preferred destination for work, investment and business establishment. Reasonably, it is the first obstacle facing the owners of this vital sector.

And because the matter is related to more than one federal and local body, there have been, for more than a decade, committees, meetings and decisions that have tried to find solutions to this dilemma, yet this sector's share of financing does not exceed 3% of the total credit, at a time when it reaches The loan portfolio of banks is more than one trillion and 779 billion dirhams, according to the latest data issued by the Central Bank.

According to a questionnaire conducted by the Central Bank itself, it revealed that the time it takes to open a bank account for small and medium-sized companies may reach up to a month, and the results of the survey also revealed that customers who are owners of micro, small and medium enterprises, face financing challenges related to the difficulty of obtaining financing, and the length of the approval period that may reach To two months, without taking into account the importance and dynamism of this sector.

The questionnaire also showed that the cost of financing is high, and it ranges between 7% and 12% despite the fact that market conditions and current returns do not exceed 4% to 5% in the largest percentage of sectors, which means that debt service consumes the entire return and more, in addition to the fact that some banks impose interest It reaches 17% under the pretext of a high degree of risk, even though the main interest levels do not exceed 1%.

All this and much of what was included in the central questionnaire, and what the business owners demanded, the Central Bank appreciated the issuance of a system for small and medium enterprises under the name "Market Behavior", and although the system is very important, and the development of a roadmap for banks to work in dealing with this vital sector, the matter is It still needs more definition, and strict rules, especially with regard to fees, interest rates and the speed of completion of transactions.

There are undoubtedly positive developments in the system to facilitate financing of small and medium enterprises, which came into effect as of last Thursday, and these projects were able to obtain financing, financial products and services provided by banks in a better way, and they were also able to open bank accounts quickly, within three days. Work, but the matter is still loose in some points, and most importantly, a clear mechanism must be found to monitor the implementation of the system by banks, so that some banks do not operate in a way in which this new system comes out of its content.

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