In a move that will further boost the United Arab Emirates (UAE) economic diversification and industrial transformation agenda, Emirates Development Bank (EDB) signed a memorandum of understanding (MoU) with Mashreq Bank to open up new credit avenues for small and medium-sized enterprises (SMEs) in the country.
As part of the agreement, EBD will provide credit guarantees and co-lending programs to Mashreq Bank’s SME customers to meet their financial requirements. SMEs can use the credit to purchase equipment, inventory, and raw materials, build work spaces, expand operations, and pay salaries and rent.
While Mashreq offered SMEs financing of up to $2.7 million(Dh10 million), EDB will warrant or co-lend 50 % of the total amount. Moreover, the credit guarantee program will support startups by making available capital up to $273,000, with EDB extending the guarantee on 60% of the amount.
Commenting on the inked pact between the two major financial lenders, Ahmed Mohamed Al Naqbi, Chief Executive Officer, EDB, said, “SMEs are the backbone of the UAE’s economy and the government has placed considerable emphasis on developing the business ecosystem to boost their contribution to the non-oil GDP. Our partnership with Mashreq Bank will help facilitate financing through credit guarantee and co-lending options to SMEs and allow greater operational flexibility to the entities. This is part of recently announced EDB’s strategy to enable UAE’s economic diversification and provide financing support to SMEs operating in key sectors.”
Stressing that financial support to businesses is of critical importance, Ahmed Abdelaal, Group CEO, Mashreq, said, “SMEs represent more than 94 % of the companies and employ about 86 % of the private sector’s workforce in the country.”
The MoU is part of EDB’s post-COVID recovery initiatives, enabling plans to develop the national industrial ecosystem across key sectors and expanding SME funding support to businesses operating in vital industries. EDB has recently signed similar agreements with several other financial institutions and platforms in the country to support SMEs, including the Commercial Bank of Dubai, NBQ, and Beehive. Furthermore, EDB has listed a $750m bond on Nasdaq Dubai.
In a broader picture, the new agreement between the two most leading financial institutions of the UAE is in line with the national efforts to empower the start-up ecosystem and boost their contribution to the overall national economy. It is notable that the SME sector represents more than 94% of all companies in the UAE and provides for more than 86% of the private sector's workforce jobs. The UAE government is thus working steadily to enhance the contribution and performance of this sector.
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