UAE SMEs successfully moved from resilience to prosperity

RAKBANK launched its inaugural SME Confidence Index report in collaboration with independent research company RFI Global. Among the headline findings of the report is that the Small & Medium Enterprise (SME) sector in the United Arab Emirates has successfully moved from a stage of resilience to prosperity after the Covid-19 pandemic, with two in three SMEs expressing a positive view of the future business environment in the country.

The report found an overall confidence index score of 61 among UAE SMEs – a number based on RFI Global’s analysis of macroeconomic indicators in the UAE, as well as survey responses from over 1,000 SMEs in the country collected between November-December 2023, all of which contributed in the final Index.

With most of the industries in the report topping the index base score of 50, it is clear that SMEs across the board are experiencing a period of robust growth, propelled by notable increases in revenue over the past two years, especially within key sectors such as Construction & Manufacturing and Public Services.

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 per cent of companies and contribute over 50 per cent 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.”

The report refers a strong economic forecast for the UAE, with non-oil GDP expected to grow by over 4 per cent in 2024, and overall GDP projected to grow by 5.70 per cent 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.

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.

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.

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.”