The Dubai SME recently published its second report on ‘The State of Small and Medium Enterprises (SMEs) in Dubai’ to provide an overview of the Micro, Small and Medium enterprises in Dubai in 2019, especially with regards to their characteristics, performance and aspirations.
According to the report, small and medium enterprises are the backbone of Dubai’s economy, representing 99.2% of the number of establishments in the Emirate. These businesses play a pivotal economic role, accounting for 51% of the workforce and contributing around 46% of Dubai’s GDP.
The total number of SME establishments in Dubai is estimated at 151,875 and has registered a 9% CAGR since 2008 when the SME business count was estimated at 72,695. Micro firms account for 61% of the total business count in Dubai, followed by Small and Medium firms, that account for 36% and 2% of the total number of enterprises in Dubai, respectively. Notably, the proportion of Small businesses has doubled from 18% in 2008 to 36% in 2017. In terms of the Segment-wise split, Services account for a majority of SMEs (48%), followed by Trading (47%) and Manufacturing (5%). Notably, in comparison to the historical economic period of reference (2008), the proportion of Service based enterprises
has gone up considerably (48% in 2017 from 35% in 2008). This is in line with the UAE’s strategic focus to transition from a primarily Trading oriented economy to a ‘knowledge-based’ Services economy.
SME Economic Contribution
The Dubai SME sector contributes an estimated AED 198.6 Billion to the total Gross Value-add (GVA) of the Dubai economy. This translates to a contribution of 51%(1) of the aggregate GVA of Dubai and around 46% towards Dubai’s aggregate GDP. The GVA of the sector has grown by a CAGR of 5.7% between 2008 and 2017. The most pronounced change in terms of Segment contribution is in terms of Medium enterprises whose GVA contribution has gone up from 17% in 2008 to 28% in 2017.
SME Employment Contribution
The Dubai SME Sector accounts for 1.41 million workers in Dubai, translating to a net employment contribution of 56% to the Dubai economy. The total number of employees in the sector has grown by a CAGR of 6.4% between 2008 and 2017, with proportionate employment contribution increasing by 14% over the same period.
Access to Finance
In this report, ‘Access to Finance’ assesses the key sources of funding that SMEs in Dubai deploy to start up and expand their business operations; the typical funding requirements that businesses have in the context of the key purposes for which financing is accessed as well as the most prominent challenges that they face, in acquiring the quantum and type of financing products they need.
- Banks in Dubai show an inclination for preferential lending to relatively larger, established and potentially more sophisticated and structured businesses, vis-à-vis smaller, riskier enterprises.
- There is a visible trend reflecting the growing orientation of Dubai SMEs towards taking an equitable mix of long term and short-term financing to balance their capital expansion plans with operational requirements.
- SMEs in Dubai have a stronger preference towards conventional financing products over Sharia-compliant Islamic products.
- Managing working capital and making capital investments, still remain the top objectives for availing finance; however, SMEs in Dubai are now adopting a more strategic focus towards the use of funds.
- The lack of tailored, affordable financing solutions, aligned to business needs is the most prominent challenge, impacting SMEs that need external funding to sustain and grow.