Finance: Taking a page out of the experts’ book Finance: Taking a page out of the experts’ book

If ever there was a time when financing was a key issue for SMEs, its now. Whether it’s finding that initial injection to help set-up the business, handling day-to-day business transactions or trying to expand, no-one is finding it an easy road. Mike Byrne puts some tough questions to top business leaders to find out what more can be done to drive financing within SME circles.

Michael Hasbani, MENA Strategic Growth Markets Leader, Ernst & Young

During his 18-year career in management consulting and professional services, Michael has led teams of professionals in undertaking human capital and organisational restructuring assignments as well as providing focussed advice to some of the region’s largest and most progressive companies.  He is currently a partner at the Ernst & Young Dubai branch, leading the Advisory Services Department.

Generally, what are the main points entrepreneurs and start-up in this region should consider when seeking funding in order to grow, prosper or reinvent themselves?

MENA seems to face immense challenges due to the low levels of SME financing by banks and financial institutions. Attracting funding can be extremely testing for aspiring entrepreneurs and start-ups have a tough time simply starting up as competition for available capital is fierce.

Entrepreneurs need to keep their finger on the pulse of the market. Access to information and trends, but more importantly having the right strategies and resources in place to leverage this information effectively, can be a game-changer. Developing a sustainable business model with strong fundamentals and adequate risk-management layers should always be an important parameter for any entrepreneur seeking access to funding.
For investors (interested in venture set-ups), the priority is long-term revenue generation. In today’s competitive global business environment, having well-carved out customer retention and acquisition strategies and an appropriate framework to manage anticipated risks are critical to attracting funding.

And of course, agility and flexibility to reinvent are crucial.

What is your advice to entrepreneurs and SMEs who want to remain agile, adapt quickly to change and diversify but who might consider change an unaffordable tactic or risk from a cost point of view?

It’s very simple – if you fail to prepare, you prepare to fail.

Standing still does not help and market leadership gravitates regularly. Change does not always come with a huge price-tag. Change, more often than not, is linked to keeping your ears close to the ground. It’s about bringing that slight modification or enhancement to your product or service – anything that provides you with an edge over your competitors.

In fact, improving cost competitiveness in itself is an important adaptation tactic SMEs should be looking at. Closely monitoring cash burn rate, improving operational efficiency, considering new pricing strategies and models, managing discretionary spending, acting to preserve capital and optimising IT infrastructure are some affordable change management tactics.

Michael Hasbani, MENA Growth Markets Leader, Ernst & Young

One of the key areas that you specialise in is transactions. What are the common mistakes which you see entrepreneurs and SMEs making with their transactions and what is your advice to them for more efficiently achieving their goals?

A common mistake, post the financial crisis, is knee-jerk reaction to cash management. Many companies have not moved beyond short-term or tactical efforts to institute policy and process changes.

Entrepreneurs have a keen insight into actions needed to remain on course. These are times when fortunes are made and new market leaders rise to the top. Their approach to transactions is to cautiously raise capital, renew focus on seeking mergers and acquisitions and divest non-core assets to realise capital. Our advice to entrepreneurs is to secure their present, protect assets, improve performance by reshaping business, and pursue new market opportunities. However, it is essential to take a measured approach.

Look to enter new markets through acquisitions at reduced prices or enter partnerships where significant customer value can be derived. Often alliances in new markets offer more feasibility than the option of a Greenfield set-up. Dispose non-core assets if they are non-strategic and identify early acquisition/consolidation opportunities.

What other advice can you offer in terms of SMEs better managing their finances, especially at a time when chasing payments, making payments and accessing further financing often pose problems?
Our advice to SMEs is to understand their core competencies, their position in the customer value chain and identify low-cost/high-quality suppliers to support in achieving that positioning.

Entrepreneurs should focus on designing and building an efficient supply chain model, develop early warning systems to identify distress and cash-flow obstacles. Several risk mitigating strategies can be deployed such as migrating key supplier risks and utilising short-term/contract resources at times of peak demand.


Aziz Valliani, Founder and Chairman, enTrust & Title

With a business career that has spanned over 30 years, Aziz has led several private and public multi-national companies, including and Crossvue Inc.,  as well as directing the Escrow Institute of California and Escrow Association of California from 2005-2007. In 2008 he founded enTrust & Title in Dubai, with a view to streamlining escrow services in the region.

What are the advantages of escrow services for SMEs?

We realise that people involved in transactions are often limited by time and are too busy to run around getting paperwork sorted and making appointments. In this respect we will handle this for them. A lot of expatriates, who may no longer be here and back in their own countries, also give us power of attorney to handle certain transactions on their behalf.

The agent’s role is to make sure that both parties are comfortable with the transaction and that the agreement is honoured within the time frame set down. Both parties are monitored to make sure they are performing to their respective obligations. The role of the escrow agent can be performed by individuals from independent companies like our own, from agents of a bank and attorneys.

Aziz Valliani, Founder and Chairman, enTrust & Title

Can you elaborate on the areas where SMEs commonly request escrow services?

We handle real estate transactions, credit notes, bad debt, we do business transfers and we do what is called, creative transactions. In the latter instance it’s normally an issue of a person wanting to buy a property but they are not sure of the neighbourhood, if they are going to like it or if their job is stable enough. So if they wanted to purchase this property, but only after renting for a couple of years, then they may want that option available and not for the landlord to sell it while they are renting. So escrow agents help accommodate that.

We also deal with aircraft transactions, intellectual property and personal notes that people may have – in this instance if one family wants to issue a loan to a family member or another family to help set up a business, interest free, and to be paid over a period of 15 years, then we arrange the terms and conditions and cheques are regulated and paid through us.

Taking into consideration that SMEs often run on small budgets, how affordable an option is using an escrow agent for transactions? Has the cost been reduced in recent times as these services have become more widespread?

We if you ask me the cost is not high but if you ask the customer then they will tell you it is too much! It’s like any other business – it’s all in volume and you need to have a certain standard operating cost. So naturally the more that a customer wants us to do for them, the larger the volume of work for us and the more the cost will have to go up.

In this region the cost of escrow services are falling in line with costs around the world. Transactions can vary from the millions to the thousands depending on the clients, so costs will naturally vary according to this.

But in the scheme of things, it’s an affordable service for SMEs as well as larger corporate companies – for peace of mind and security throughout the transaction and for a lot of the worries and logistical issues that the service handles, then the cost is good value for money.


Aziz and his team also act as instructors for classes on escrow services at the Dubai Real Estate Institute (DREI), which is an arm of the Real Estate Regulatory Agency (RERA). Best practices are dealt with and attendees are mainly progressive companies who want to educate themselves and who deal in domestic as well as international markets. Bringing safety and security and protecting the consumer is becoming an area where all companies, big and small, are investing time and money.

Classes are mainly attended by bankers, developers, brokers, attorneys, SME owners and governmental officials.


Jahangir Aka, Senior Executive Officer, SEI Investments Middle East

Prior to establishing SEI’s office in Dubai in 2008, Jahangir was responsible for sales and marketing initiatives in SEI’s London branch. He has also worked extensively for Standard Charted for over nine years in roles across Europe, Asia and the Middle East. Jahangir has been actively involved with entrepreneur mentoring groups in the UK. Within the UAE he has also helped develop entrepreneurship through the CERT Wharton EPIC Programme.

What are your views on the SME segment and the financial difficulties many of them face?

What I can see is that not everyone is learning the lessons they should have learnt from the last crisis. Yes people have been more cautious in recent years but sadly I think that 85 – 90% of people or businesses that I see will revert to old behaviour.

The reason we write our papers is to highlight and make it more visible to people, no matter what it is, that you learn from what happened in the crisis – and that goes to all business, whether SME, investor, investment firms, and banks. SMEs cannot carry out due diligence with a two man team – businesses need to recognise that they need help from professionals and leveraging resources from third parties because they can’t go on taking risky decisions to save costs.

Jahangir Aka, Senior Executive, SEI Investments Middle East

As you specialise in due diligence, what financial elements of running and operating an SME do you feel need more efficiency?

Well there is a better way for these businesses to manage their risk management in general. One element which could be re-worked for better efficiency is that of gratuity portfolios. Currently businesses finance this through their cash flow. In the West these things are called pensions, are better categorised and these are pots which the company will move aside and provide the employee protection with because they are separated from the cash flow of the company.

As it stands now, here, if you have to pay out some cost you have to take it directly from your cash flow – there is no market growth driving savings or investment returns of equity.

What SMEs in the region need to do, for the protection of their employees, is separate the cash of their gratuity from their balance sheet as is done by businesses in the West and push the liabilities off their balance sheet.  So if you invest $93 dollars this year it will be $100 dollars next year – this drives the cost of the company down and it’s a more efficient way of managing that liability.

In your opinion what are the realistic options entrepreneurs and start-up SMEs have for seeking funding for their potential business?

I think less of an issue is the bank issue, and the lack of funding being offered by banks. A good entrepreneur, in an environment like this where there is cash if you seek it, will be able to sell their idea, if indeed the idea is worth selling. A lot of the businesses that try and sell their concept and come to market are honestly weak. It’s so very difficult being an entrepreneur and part of that is having the ability to articulate the proposition and to sell the proposition.

If your idea is good enough and you are determined enough you will find someone to invest in your idea. This region, contrary to popular belief, has plenty of capital, whether it is domestic or foreign. Between the local capital and the expatriate communities there are plenty of doors to go knocking on!

I don’t know a brand new start-up that has received a big chunk of change to set itself up, whether it is in the UK or whether it is here.

When seeking funding for a business, entrepreneurs and start-up SMEs need to look for the three Fs: friends, family and fools. When I say fool I mean it in the sense that everyone else might see that person as a fool but, regardless, they have the confidence and vision and belief to persist with it and attract people who are willing to be fools with you and to back an idea that everyone else sees as unworkable.

Rushika Bhatia Editor

Rushika Bhatia is one of the region’s leading commentators on business and current affairs issues. She is the Editor of SME Advisor magazine - the flagship title of CPI Business. She is passionate about infographics – with special emphasis on data, research and statistics. Rushika has a Bachelor’s Degree from Indiana University, USA and is also CIMA qualified.

More in Featured, Finance
Corporate wellness: Damage control

If you had a problem that was cutting down productivity in your employees by 35%,...