UAE Export Credit Firm Announces Trade Finance Support To SMEs

Recently, a worth of AED 420 million ($114 million) trade credit backing has been initiated by the Etihad Credit Insurance (ECI), a Federal export credit company of UAE to small and medium enterprises (SMEs) from January to November of 2020 to strengthen their liquidity amid opposite financial circumstances.

The aforesaid trade credit support translates to AED1 billion ($272.2 million) non-oil trade insured turnover as small-size businesses have witnessed difficulties in competing in domestic as well as global markets amid the COVID-19 pandemic.

As per the ECI, the initiated trade credit support is expected to help SMEs in minimizing their cost of bank funding as well as make them capable of discounting their invoices from their respective banks at the favored rates. However, the invoices are secured by ECI.

The main purpose behind granting this big support to SMEs is their vulnerability in the global market. According to the report released by the US Bureau of Labour Statistics, only 50% of Startups are capable enough to succeed in the fifth year of operation following up to a 33% dropdown in the 10th year.

Regardless of the reduced chance of operations, the significance of SMEs in the viable worldwide economy cannot be ignored. The latest data report conducted by the World Bank indicated 90 percent of trade and over 50 percent of employment globally were represented by the SMEs.

The remarkable contribution of the SMEs towards UAE’s GDP has also been shown by the Federal Competitiveness and Statistics Authority, UAE. As per the report, it is evaluated at 53 percent in 2019, higher from 49 percent in 2018.

Despite these, SMEs are also providing aid to 95 percent of the companies in the nation along with 86 percent employment of the absolute labor force in the non-oil private sector.

These above-mentioned data are capable enough to demonstrate the dominance of SMEs in the overseas market but due to their fragile survival, they are at high-risks by various financial institutions, driving organizations to suffer while gaining access to credit.

To solve this problem, the SME Protect has been announced by the ECI, a business credit solution for SMEs to boost their development plans worldwide and help them ensure smooth arrival in the high-growth market.

As per the CEO of ECI, Massimo Falcioni, “SME Protect is the actualisation of our mandate to accelerate the SME growth and sustain the non-oil foreign trade growth development in the UAE. We aim to further bolster the capabilities of our nation’s SMEs through our bespoke financial products that will help them achieve their expansion goals and propel them towards greater heights.”

In an interview with Arabian Business in October, he further added that only a quality product or service is not enough as long as the companies have legitimate insurance and financial backing to succeed in the global market.

The ECI is assuring the banks which implies that they can provide financial assistance to the exporters and will get payment in the event of opposite circumstances.

In the initial nine months of 2020, over 1,600 revolving credit guarantees were issued to the exporters by the ECI along with 40 percent of the companies upheld being SMEs.