Abu Dhabi earmarks 15% of procurement spending to SMEs and micro businesses

The move is aimed at minimising the impact of the coronavirus outbreak and helping businesses grow despite economic fluctuations

Abu Dhabi, United Arab Emirates - Reporter: N/A: Ramadan. Ramadan decorations on the corniche. Monday, April 27th, 2020. Abu Dhabi. Chris Whiteoak / The National

The government of Abu Dhabi is earmarking 15 per cent of procurement spending and annual contracts to micro, small and medium enterprises (mSMEs) from 2020 onwards to spur growth and offset the impact of the coronavirus pandemic.

The aim is drive the growth of small businesses as “backbone of the economy”, the Abu Dhabi Media Office said in a tweet late on Tuesday evening.

Other measures to help smaller firms include the suspension of bid bonds and waivers of performance guarantees for projects worth up to Dh50 million, which are being introduced from this year onwards for mSMEs and Emirati entrepreneurs. These measures are being taken as part of the Ghadan 21 initiative, further tweets from the Media Office on Wednesday explained.

SMEs are a key component of Abu Dhabi’s business landscape, accounting for 98 per cent of all companies in the emirate, 29 per cent of its gross domestic product (GDP), and 44 per cent of the non-oil economy.

Abu Dhabi, which accounts for about 6 per cent of the world’s proven oil reserves, last month, rolled out an economic stimulus package to help soften the impact of the coronavirus on its economy. The economic relief scheme includes 16 initiatives aimed at reducing the costs of living and supporting businesses in the emirate.

Earlier in April Abu Dhabi’s department of finance teamed up with three of the emirate’s top lenders to expand the SME Credit Guarantee Scheme introduced as part of Abu Dhabi’s economic stimulus.

Under the deal with Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank and the country's biggest lender First Abu Dhabi Bank, the government is guaranteeing up to 80 per cent of the value of the scheme extended to SMEs, it said in an April 16 statement.

The pact provides SMEs with wider access to renewable financing options for working capital loans for a three-month duration and term loans for up to four-year duration to support further investment in Abu Dhabi, the department of finance said at the time.

The UAE, the Arab world's second-biggest economy, rolled out Dh282bn in fiscal and monetary support last month, providing zero interest funding to banks to boost lending growth in the country. The government has also implemented a variety of other initiatives that range from discounted utility bills to waivers of fees to buttress the economy.

Lenders in the UAE have already rolled out a comprehensive package to reduce financial distress of their customers including relief for their SME clients, through reduced costs and fees, loan deferrals and reduced interest rates and processing fees.

Earlier this month the UAE Central Bank also urged lenders to support their private sector clients and individual borrowers to cushion the impact of Covid-19. The CBUAE said banks have so far tapped 60 per cent of a Dh50bn Targeted Economic Support Scheme that was launched in March.