Mohammed bin Rashid Fund helps more than 1,200 SMEs secure funding worth $39.7m

The role of FinTech to provide financing to companies is critical for entrepreneurial and economic growth

More than 94 per cent of all companies operating in the UAE are small and medium enterprises, the latest government data shows. Pawan Singh / The National

The Mohammed bin Rashid Fund for Small and Medium Enterprises has helped 1,224 entities to secure about Dh146 million ($39.7m) in funding over the last five years through Beehive, its financing platform that is backed by the latest technology.

The financing up to September is more than three quarters of the total Dh188m handed out to SMEs since the fund began disbursements in 2017, officials said on Wednesday.

In supporting SMEs, the fund partnered with several financial organisations, including Beehive, to provide easier access to finance.

Total disbursed financial assistance in 2021 alone stood at about Dh65.3m, of which roughly three quarters, or Dh47.7m, was handed out using Beehive, it said, noting the importance of using technology to expand financial opportunities for companies.

The fund is the financial arm of the Mohammed bin Rashid Establishment for SME Development, which is an agency of Dubai's Department of Economy and Tourism.

Using FinTech makes it easier to help finance-seeking SMEs connect with potential investors, which in turn supports economic growth and solidifies the local entrepreneurial industry, Hamda Ali Hussain, head of underwriting and risk management at the fund, said.

FinTech "also instils institutions or individuals wishing to invest in start-ups with confidence via a guarantee from the fund, allows them to reap rewarding returns and encourages entrepreneurs’ relatives and friends to financially support their projects", she said.

SMEs are considered the backbone of any economy and have played a critical role in the UAE's private sector, making up a significant portion of businesses. They are also key in the Emirates' goal of becoming the top nation globally for entrepreneurship.

The latest government data shows SMEs represent more than 94 per cent of all companies operating in the country, with 73 per cent in the wholesale and retail sector.

Local state-backed entities and strategies that support the sector include the National SME Programme, the UAE SME Council, Abu Dhabi's Khalifa Fund, Dubai SME, and Operation 300bn, the 10-year strategy that seeks to increase the industrial sector's contribution to the country's gross domestic product to Dh300bn by 2031.

In September, the Ministry of Economy launched its updated Entrepreneurial Nation 2.0 programme, which seeks to develop more than 8,000 SMEs and start-ups by 2030.

The growth in earnings of SMEs in the Emirates is almost on par with the global average of 46 per cent, up from 39 per cent last year, with two-thirds of them saying they have recovered to pre-pandemic levels, a Euromonitor study said.

Globally, the market is expected to hit $55.6 trillion by 2027 at a compound annual growth rate of 27.4 per cent, from an estimated $13tn in 2021, data from US-based research company Imarc Group said.

FinTech, meanwhile, remained the highest-funded sector across emerging venture markets — including the Middle East — in the first half of 2022, more than tripling to almost $1.68 billion, compared to a year ago, start-up data platform Magnitt said in a recent study.

Funding activity for the sector nearly doubled in 2021, with those in the Middle East and North Africa region alone raising almost $1bn, which is a 78 per cent increase from 2020, Dubai's FinTech Hive said in its annual report released last week.

The fund's partnership with Beehive provides Emirati-owned SMEs with financing options, including a term loan under a capital guarantee scheme called Business Finance, and working capital funding called Invoice Finance.

From its inception, the fund has received 6,515 requests from 1,211 SMEs for Invoice Finance, a revolving credit facility, while also extending Business Finance to 13 projects. The former has a significantly large share worth Dh138.1m — about 95 per cent of the total. In 2022 alone, total funding from Invoice Finance hit Dh41.4m.

The fund offers financing options for SMEs, including Dh625,000 with a 50 per cent capital guarantee and Dh1.25m backed by a 100 per cent capital guarantee.

UAE-based funds continue to introduce programmes to assist local SMEs. On Tuesday, Abu Dhabi's Khalifa Fund for Enterprise Development and Finance House signed an agreement to boost funding opportunities for SMEs owned by Emiratis.