Shuaa Capital secures Dh500m loan to fund SMEs in the UAE

The loan, which has a tenure of 42 months and includes a Dh50 million standby letter of credit, was made to Shuaa’s fully owned SME financing subsidiary, Gulf Finance Corporation.

Shuaa Capital, Dubai’s oldest investment bank, said it has secured a Dh500 million syndicated loan to fund lending to small and medium-sized enterprises (SMEs) whose growth policymakers have urged over the past year.

The loan, which has a tenure of 42 months and includes a Dh50m standby letter of credit, was made to Shuaa's fully owned SME financing subsidiary, Gulf Finance Corporation (GFC), the investment bank said on Tuesday. Abu Dhabi Commercial Bank was the chief arranger of the loan.

"The Dh500m facility provides a stable long-term source of funding for Gulf Finance to meet its objectives of providing growth finance for entrepreneurs and small and micro businesses," said Sheikh Maktoum Hasher Al Maktoum, executive chairman of Shuaa and chairman of GFC.

“It reflects the improved financial position of GFC, one of the longest-established lenders to the SME sector in the UAE, and the Shuaa Group overall. This is an important milestone for Gulf Finance’s future expansion, and the overall earnings power of the group.”

Shuaa’s lending to SMEs in the Emirates and Saudi Arabia has boomed in recent years as it focuses on generating revenue from lending after a restructuring that closed down its retail brokerage division in 2011, at a time when there was a drought of initial public offerings and thin trading volume.

Shuaa said in its third quarter results for 2014 that its lending division posted a 150.5 per cent increase in profit to Dh9.7m, driven by an increase in demand for funding from SME businesses in the UAE and Saudi Arabia.

It also said GFC opened an office in the Musaffahindustrial zone in October, its second in Abu Dhabi to tap into demand from well-established companies and start-ups in the area. More than 65 per cent of SMEs in Abu Dhabi are located in Musaffah according to Shuaa.

UAE government officials have been counting on small businesses to play a key role in the development of the economy. SMEs account for 86 per cent of the workforce in the private sector, according to the Ministry of Economy. And 300,000 companies can be classified as part of the SME sector, ministry data shows.

The UAE is especially keen to give Emiratis a chance of helping the economy by starting their own businesses, and a number of big companies are promoting the initiatives by inviting SMEs to be their suppliers. Banks have played their part in recent years as they recovered from the financial crisis of 2008, especially as large corporations increasingly tapped into the bond market instead of bank loans, analysts say.

Banks typically do not give a breakdown for lending to SMEs, but almost every other type of lending has grown and anecdotal evidence suggests it is the same for SMEs despite complaints by many small business owners that they find it difficult to get loans.

Others banks involved in the Shuaa loan transaction include National Bank of Oman, United Arab Bank, National Bank of Fujairah, Blom Bank France and Bank of Baroda.

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