UAE launches rescue initiative for struggling small firms
According to Reuters, UAE banks agree some “Mini Insolvency Law” to help struggling SMEs whereby Banks in the United Arab Emirates would suspend legal action against small and medium sized enterprises (SMEs) struggling to repay their debt. The understanding is for up to three months aimed at preventing a surge in defaults that may jeopardise the whole economy of the UAE.
The initiative, involving members of the business sector coordinating with the finance institutions, is intended to give the SMEs that represent approximately 60% of UAE’s gross domestic product, some extra room and time to manoeuvre. Banks have been hit by the downturn in contracts turnover as a result of prices volatility of commodities. . . . [ms-protect-content]
“What we have put on the table is a mini insolvency law,” said Abdul Aziz al-Ghurair chairman of the UAE Banks Federation, the industry body representing 49 banks. “We will give the customer time and space as long as they’re genuine.”
The National Business reported a couple of weeks earlier that Bank chiefs have launched a loan-restructuring scheme for indebted businesses where lenders work together to help firms to reduce their debt burden.
The UAE Banking Federation (UBF) revealed the plan yesterday aimed at struggling small and medium-sized enterprises (SMEs).
The move comes as progress on the country’s long-awaited insolvency law, which contains a similar framework for the restructuring of corporate debts, has stalled.
Under the terms of the UBF plan, which has been in development since late last year, an SME with multiple loans that is experiencing difficulties can opt to enter the scheme, whereby lenders “coordinate their position and work to assist the company in restructuring its future repayments”.
The UBF did not say which SMEs would be eligible for the initiative, or when it would come into effect.
“Lending to SMEs is a high priority for us and we have agreed now on a plan which will definitely be a win-win for all involved,” said the UBF’s chairman Abdul Aziz Al Ghurair.
“This again reflects banks’ commitment to apply a coordinated approach, to alleviate SME-funding difficulties and continue banks’ support to the SME sector being vital to the national economy,” said Mr Al Al Ghurair, who serves as the chief executive of Mashreq.
Small businesses have been hit hard by an economic slowdown triggered by a sharp decline in the price of oil and made worse for some exporting companies by a strong US dollar, to which the UAE dirham is pegged.
Read more at the above mentioned addresses.