Two out of every three small and medium-sized enterprises (SMEs) harbor a positive outlook regarding the future business environment in the UAE, according to the RAKBANK’s inaugural SME Confidence Index report.
The report, crafted in collaboration with the reputable independent research firm RFI Global, sheds light on the current state of the SME sector post Covid-19 pandemic.
Key takeaways from the report indicate a promising shift within the UAE SME landscape. It suggests that SMEs have transcended the phase of mere resilience and are now on a trajectory towards prosperity.
The overall confidence index score stands at 61 for UAE SMEs, a figure derived from a meticulous analysis of macroeconomic indicators within the UAE.
Additionally, insights were gleaned from a comprehensive survey encompassing responses from over 1,000 SMEs across the nation. These survey inputs, collected during the period of November to December 2023, significantly contributed to the formulation of the final Index.
Notably, the majority of industries covered in the report surpass the index’s base score of 50. This suggests a prevailing trend of robust growth across various SME sectors. Particularly noteworthy is the surge in revenue observed over the past couple of years, with sectors like Construction & Manufacturing and Public Services leading the charge.
RAKBANK SME Confidence Index
Commenting on the launch of the RAKBANK SME Confidence Index, Raheel Ahmed, Chief Executive Officer at RAKBANK said: “Small and Medium Enterprises are the backbone of every healthy economy, and this is especially true in the UAE, where SMEs make up 94% of companies and contribute over 50% to the country’s GDP. That is why we centred this inaugural report around the SME sector, in line with our priority of supporting this flourishing segment through actionable insights to assist in their decision-making, towards greater business growth and success.”
Economic forecast
The report refers a strong economic forecast for the UAE, with non-oil GDP expected to grow by over 4% in 2024, and overall GDP projected to grow by 5.70% this year. The RAKBANK SME Confidence Index also highlight steady recovery in factors such as hotel occupancy rates close to pre-pandemic levels, which signals a rebound in the tourism sector that is contributing to the general positive outlook among SMEs about their future revenue prospects and the business landscape in the next 12 months.
Challenges faced by SMEs in UAE
However, the report also talks about the challenges faced by SMEs, including rising labour, operational and other business costs; the impending introduction of corporate tax; and the cost of capital/credit. To navigate these challenges, SMEs need continued support and attention from financial institutions, in addition to the initiatives we are already seeing from government entities, particularly the UAE.
Drawing from a wealth of macroeconomic data and business sentiment analysis, the report suggests that the issuance of new business licenses in Dubai, in particular, also reflects a strong business environment. Despite challenges posed by fluctuations in Brent oil futures, the overall macroeconomic indicators suggest a fertile ground for SME growth and development.
While SMEs are proactively embracing innovation and expansion, showing a strong trend towards launching new products/services and bullishness towards customer demand and pricing of products/services, they also displayed one common thread – the critical role of banking support. The need for tailored financial solutions and advisory services is evident in the SME sector. In fact, one of the report’s standout findings is the high level of satisfaction with banking support among almost all the SME sectors,.
Business sentiment
The RAKBANK SME Confidence Index also offers an in-depth analysis of business sentiment across various industries, with a special focus on Construction & Manufacturing, Transport, Trading, Public Services, Professional Services, and Consumer & Retail Services, with all the sectors again demonstrating strong confidence.
The Construction & Manufacturing sector, has a confidence index score of 62, has seen the highest revenue increase over the last two years compared to other industries. Transport-dependent SMEs, with an index score of 60, show a cautiously measured optimism due to pricing adjustments, but a clear intention to explore new operational channels.
ALSO READ:
Public Services SMEs and Professional Services SMEs also stand out with a confidence index score of 62, thanks to significant revenue growth. Meanwhile, Consumer & Retail Services SMEs and Trading SMEs saw a more subdued trend, reflected in a lower but still significant confidence index score of 59 among the businesses surveyed in these industries.
Dhiraj Kunwar, Managing Director, Business Banking at RAKBANK added: “RAKBANK has a rich legacy of supporting SMEs, and the launch of our Index in partnership with RFI Global builds upon this legacy, as the UAE’s first SME-specific confidence survey. We trust that this report will bring genuine value to small and medium enterprises who are seeking out credible content and data points to align their business strategy.”
While talking about the proposed plan to introduce 10-year Golden and 5-year Silver Business Licences in the UAE, Kunwar highlighted the benefits of these licences, emphasizing the value of long-term commitment and continuity for businesses.
He noted that such licences provide peace of mind by eliminating the need for annual renewals, ultimately fostering an environment conducive to attracting more investments into the country.
tanvir@dubainewsweek.com
