UAE’s SMEs Received AED420 Million Trade Credit Support Till November 2020 From ECI

Etihad Credit Insurance (ECI), the UAE Federal export credit company, has issued AED420 million worth of trade credit support to the small and medium enterprises (SMEs) from January to November 2020, which translates to AED1 billion non-oil trade insured turnover, as it carries out its mandate of accelerating the UAE’s non-oil economy and ensuring business continuity.

Mirroring its steadfast commitment to boost national export activity and economic diversification, the ECI has insured the exports of the SMEs as well as its operations in the domestic market allowing them to stay competitive in the trade industry, especially during the COVID-19 pandemic.

The guarantees have helped protect the liquidity of the SMEs amidst this challenging economic cycle, assisting businesses in reducing their cost of bank funding and allowing them to request their preferred bank to discount the invoices secured by the ECI at a preferential rate.

The SMEs have always been regarded as a fragile sector. Only 50 per cent of start-up businesses make it to the fifth year of operation, and it further drops to 33 per cent on the 10th year, according to data released by US Bureau of Labour Statistics. This means that only about one in three small businesses survives after 10 years.

The latest data released by World Bank showed that the SMEs represent about 90 per cent of businesses and more than 50 per cent of employment worldwide.

In the UAE, the Federal Competitiveness and Statistics Authority showed that the contribution of the SME sector to the UAE’s GDP is estimated at 53 per cent in 2019, up from about 49 per cent in 2018. In addition, the SMEs also contribute to 95 per cent of the companies in the country and employ 86 per cent of the total workforce in the non-oil private sector.

And yet, despite being a key player to the global trade industry, their delicate lifespan is the reason the SMEs are considered as high-risk by financial institutions, leading these businesses to have difficulty getting access to credit.

To address this pressing need, the ECI had, in 2019, launched the “SME Protect” a trade credit solution to support their growth plans globally and assist them while entering high-growth markets. The launch of this product made the ECI the first government export credit company in the Middle East and Africa to offer the SMEs an online trade credit solution to secure trade and export to more than 50 countries. In the same year, the ECI was conferred with the award for the “Most Innovative Finance Solutions in Middle East 2019” by the UK-based CFI.co, Capital Finance International, Awards, highlighting the ECI’s pioneering the SME Protect.

Massimo Falcioni, CEO of the ECI said, “The ECI understands the vital role the SMEs play in building the nation’s economy that is why we have developed an online user-friendly solution in 2019, named ‘SME Protect’ to allow the SMEs in the UAE to trade safely and confidently and gain access to international markets, thereby positioning the UAE as the global hub of trade and export.”

Risk mitigation and access to loans The ECI offers a solution to one of the major hurdles faced by the SMEs aiming to expand their export operations access to bank loans. The Federal export credit company offers financial support to the international export activities of the SMEs through its large ecosystem of strategic partners, including local and international banks. The ECI provides banks guarantees so these institutions can reduce the capital they allocate for their funding if they use collateral, thereby securing the supply chain.

“SME Protect” is a result of the survey that was conducted in 2018 in cooperation with Abu Dhabi Chamber of Commerce, Dubai Chamber of Commerce, and Ras Al Khaimah Chamber of Commerce. The survey showed that 97 per cent of the SMEs still preferred Letter of Credit and cash payments, whereas only three per cent preferred selling on credit.

Falcioni added, “The close cooperation with Abu Dhabi Department of Economic Development (ADDED), and the chambers of commerce of Abu Dhabi, Dubai, Sharjah and Ras Al Khaimah and Dubai Exports allowed a dedicated ECI team to develop several webinars coaching, counselling and guiding the SMEs to better understand their export potential, and understand how to enter in international markets and offer competitive payment terms with secured terms.”