Dubai SME, the agency of the Department of Economic Development, has launched the SME Friendliness Index to enable banks access 230,000 SMEs in the UAE and realise the AED six billion SME financing revenue opportunity.

The index is based upon a six-month landmark research that requested over 30,000 SMEs for their feedback, engaged with 487 SMEs, and 21 banks. The research involved interviews, questionnaire responses, and mystery shopping.

The SME Friendliness Index is a signaling tool that gives constructive feedback to banks about how their SME strategies are actually working. Banks know the satisfaction of their customers with reference to their competitors and identify how their product, pricing, communication and relationship management strategy are working. The Index is accompanied with an SME Tool Box that will enable the Banks develop their strategies to serve the SME market.

Dubai SME intends to do this study every two years to support banks who are key stakeholders in the development of the SME sector of Dubai and UAE.

The study revealed certain interesting findings:

  • The study has identified the market shares of the banks in 2012 as benchmark for the future.
  • The study ranks the customer satisfaction and loyalty of the banks.  Market share is an outcome of customer satisfaction and loyalty.
  • All banks have large number of transaction banking customers. Only 35% of their customers work with them as their primary borrowing customers.
  • The study identifies key competitors of each bank.
  • Only 14% of the SMEs used bank finance for their growth.
  • Of every 100 companies that approach Banks only 50 get finance.
  • Nearly 75% of SMEs bank with more than two banks.
  • The study has mapped the strategies of different banks with respect to the SMEs they serve based upon – size, accounting standards, and management.
  • The study maps the evolution of SMEs in Dubai and reinforces the utility of the Dubai SME definition in developing a three tier market segmentation strategy for realizing the SME opportunity.

The study enumerates the different challenges of the banks in serving the SME sector –quality of financial reporting, lack of credit history, inadequacy of collateral, informal management, short term planning horizon, and weak cash flow management.

Given the challenges and opportunities of the SME sector, the study maps the strategies of the different banks – in terms of the sizes of customers they serve, the quality of financial reports they accept, and the informal/formal nature of the SME management. The findings also indicate that despite the structural challenges, innovation is widespread in the banking community.

“The SME Friendliness Index is a benchmarking exercise to understand the factors that enable financial relations of banks and SMEs. This signaling exercise helps banks, the supply side, understand the SME customers, the demand side. Dubai SME will also launch a website in September 2012. The website will help SMEs become prepared for banking. Dubai SME is engaging with the auditing community to support this initiative. Dubai SME is also seeking to reenergize the existing business mortgage register,” said Abdul Baset Al Janahi, Chief Executive Officer of Dubai SME.

“Dubai SME intends to work closely with the banks to support them use the study finding and the Friendliness indicator to realise the SME opportunity,” added Al Janahi.

Dubai SME will leverage the findings of the study to create further platforms and partnerships as part of its efforts to create a vibrant ecosystem that supports local SMEs and entrepreneurs contribute to the Dubai and UAE economy.

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.

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