UAE economy minister unworried by ‘natural’ level of SME loan defaults

'This is a situation that goes up and down with the economic situation of the country and the region,' Sultan Al Mansouri told The National, describing the level of loan defaults as 'natural'.

Minister of Economy Sultan Al Mansouri said there was still plenty of room for growth in loans to SMEs. Courtesy Ministry of Economy

The UAE’s Minister of Economy Sultan Al Mansouri said the current level of loan defaults by small and medium business owners was not a concern, emphasising the growth potential of the SME sector.

"This is a situation that goes up and down with the economic situation of the country and the region," Mr Al Mansouri told The National, describing the level of loan defaults as "natural".

His comments came a week after the UAE Banks Federation said that SME borrowers had defaulted on about Dh5 billion worth of debt so far this year.

Emirates NBD last month noted a rise in the number of SME customers fleeing the country without paying debt, declining to give further ­details.

However, analysts have noted that SME debt defaults account for less than 0.5 per cent of total outstanding loans in the ­country.

"In some countries the level of bankruptcies for SMEs is up to 90 per cent. We're nowhere near that level, but it's our role is to minimise [such defaults and bankruptcies]," said Mr Al Mansouri.

He was speaking on the sidelines of the sixth UAE Conference on SMEs and Innovation, organised by the Ministry of Economy, held in Dubai yesterday.

The Khalifa Fund chief financial officer Marwan Al Suwaidi said that there had been no increase in loan defaults among the companies it sponsored, and that return on investment had improved.

“In 2013 the companies we gave loans to generated Dh3 for every Dh1 we loaned them. In 2014 and 2015 this figure has now risen to Dh4,” he said.

Mr Al Mansouri insisted that there was still plenty of room for growth in loans to SMEs, given the sector’s contribution to the economy.

“Loans granted by banks to SMEs in the UAE represent 3.8 per cent of total loans portfolio, a minor percentage that is not commensurate with the importance of the sector [to the economy], the employment it provides and its central role in relation to innovation,” he told delegates in his opening remarks.

"This sector today is on the verge of a new phase of growth and development that will see a significant shift in the coming stages, especially in providing facilities and financial incentives for citizens and ­entrepreneurs."

SMEs currently contribute more than 60 per cent of the UAE’s non-oil GDP, a figure the Government has committed to increasing to 70 per cent by 2021.

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