Abu Dhabi Government ties up with banks to expand SME financing

The deal with FAB, ADCB and ADIB will enhance support for smaller business to withstand market fluctuations

First Abu Dhabi Bank has mutually agreed with Lebanon’s Bank Audi to stop the transaction process on the acquisition of its fully owned subsidiary in Egypt.. Chris Whiteoak / The National

Abu Dhabi’s department of finance has joined hands with three of the emirate’s top lenders to expand the SME Credit Guarantee Scheme, as it looks to soften the impact of the coronavirus pandemic on smaller business.

Under the deal with Abu Dhabi Commercial Bank, Abu Dhabi Islamic Bank and the country's biggest lender First Abu Dhabi Bank, the government will guarantee up to 80 per cent of the value of the scheme extended to small and medium-sized businesses, it said in a statement on Thursday. The move is aimed at “bolstering businesses’ resilience” to withstand market fluctuations, it added.

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

“The scheme is available to all SMEs that are registered, operating and headquartered in the emirate,” the statement said.

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 GDP, and 44 per cent of the non-oil economy.

“Providing this significant sector with more financing options during this period creates invaluable long-term economic returns and ensures a sustainable and robust path towards Abu Dhabi’s knowledge-based, diversified economy,” the statement added.

The new partnership is part of Abu Dhabi’s economic stimulus package announced last month. The economic relief scheme includes 16 initiatives aimed at reducing the costs of living and supporting businesses in the emirate.

The UAE, the second-biggest Arab economy, was the first in the Middle East and North Africa to roll out Dh282bn in fiscal and monetary support, providing zero interest funding to banks to boost lending growth in the country. The government, in addition, 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 clientele. Banking benefits packages extend relief to businesses and individuals, particularly in stressed sectors, through reduced costs and fees, loan deferrals, reduced interest rates and processing fees.

Earlier this month, the UAE Central Bank also urged lenders to support the private sector and individual borrowers to cushion the impact of Covid-19 and disbursed Dh10bn worth of zero interest loans to banks from the Targeted Economic Support Scheme launched in March.