Good News Awaits Struggling Small Businesses In The UAE

Small and Medium enterprises (SMEs) are about to get a much-needed break with the possible passing of the UAE bankruptcy law, which is expected to be finalised by the end of 2016.

The new law will help struggling SMEs overcome bad debt by decriminalising bounced cheques and facilitating corporate bankruptcies, said the UAE economy minister.

Over the course of the past two years, the UAE saw a number of small business owners fleeing the country due to tough market conditions, leaving behind unpaid loans to avoid being jailed for defaulting on debts.

“There is a need for a bankruptcy law as soon as possible,” said Sultan Al Mansouri during his visit to the Etihad Airways Innovation Centre in Abu Dhabi this week.

“This is almost the Ministry of Finance section because it is under their jurisdiction. What we have from their side is that it is in the process. It should be hopefully finalised during the upcoming months,” he added.

Earlier this November, Abdul Aziz Al Ghurair, the chief executive of Mashreq and head of the UAE Banks Federation, said that a number of small business owners had fled the country, leaving about Dhs5 billion of unsettled loans.

In May, however, Al Ghurair said the potential fallout from rising levels of SME bad debt had been contained.

Several initiatives have been already set in motion by the UAE authorities in order to help struggling startups.

This year some banks have already decided to stop criminal prosecutions of bounced cheques in the sector, with a ‘rescue initiative’. 

The UAE Banks Federation (UBF), a professional body representing 49 banks in the UAE, recently announced a new mechanism that in effect would act as “a mini-insolvency law” aimed at preventing a surge in defaults.

In July last year, H.H Sheikh Mohammed Bin Rashid Al Maktoum , UAE Prime Minister and Ruler of Dubai, passed a draft law that presents flexible strategies to bailout businesses faced with financial troubles that might lead to bankruptcy.