The Dubai Government has defined what qualifies as a small business as part of an initiative to help the sector develop in the emirate.
The Mohammed Bin Rashid Establishment for SME Development, an arm of the Dubai Government, announced the official definition of what constitutes micro, small and medium-sized businesses based on employee numbers, annual turnover and industry classifications.
The organisation will use the definition to help develop policies designed to assist small-to-medium enterprises (SMEs) and encourage local banks to create specific financial products, said Abdul Baset al Janahi, its chief executive.
“Starting today, banks can design products that cater to the sector itself,” Mr al Janahi said. “You cannot do a ‘one-size-fits-all’ product.
“Now when the banks and credit analysts evaluate the business and the risk related to it, they can know the category it fits in and what kind of financing it will need.”
The definitions are:
Ÿ Micro businesses: up to nine employees and a turnover of Dh9 million (US$2.4m) for trading companies; up to 20 employees and a turnover of Dh10m for manufacturing companies; and up to 20 employees and a turnover of Dh3m for service companies.
Ÿ Small businesses: up to 35 employees and a turnover of Dh50m for trading; up to 100 employees and a turnover of Dh100m for manufacturing; up to 100 employees and a turnover of Dh25m for service.
Ÿ Medium businesses: up to 75 employees and a turnover of Dh250m for trading; up to 250 employees and a turnover of Dh250m for manufacturing; up to 250 employees and a turnover of Dh150m for service.
There are about 80,000 Dubai businesses in the small-to-medium enterprise categories, or 98.5 per cent of the entire Dubai business environment, said Alexandar Williams, the director for strategy and policy at the Mohammed Bin Rashid Establishment for SME Development. Recent government figures have shown SMEs account for about 85 per cent of all jobs in the UAE and contribute to 46 per cent of its GDP.
With the definitions finalised, the agency plans to release figures on the economic effects such enterprises have on the Dubai economy at the end of the first half of next year, Mr Williams said.
Reaction from the business community at yesterday’s announcement was generally positive, but some questioned whether the Dubai Government would protect new small businesses from insolvency.
“There’s a potential for Dubai to become the entrepreneurship centre of the Middle East,” said Dale Murphy, a senior research fellow at the Dubai School of Government.
“One of the first steps I’d work on now is reforming insolvency laws, which is under way in the context of the large corporate world, but there has to be attention to the beneficial impact in smaller businesses.
“In order to undertake the risk of starting a business, you need to make sure that you’re not going to go to jail if you fail.”
In the UAE, if a business provides a cheque from an account with insufficient funds, the police can issue a warrant for the signatory’s arrest.
Sami al Qamzi, the director general of the Department of Economic Development (DED), which oversees the SME agency, said UAE bankruptcy laws were under review with the DED and other federal authorities.
“We’ll have to review all the existing policies and give our recommendation to solve the current situation,” Mr al Qamzi said.
“It’s an ongoing exercise that is under review.”
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