Dubai SME launched a 600 million dirham ($163 million) fund designed to help new and existing Emirati businesses grow, official news agency WAM reported earlier this week.
This comes a few weeks after a proposed law to make the United Arab Emirates more open to foreign investment as well as make the UAE more attractive for initial public offerings. The government has said it would like to reduce its dependence on oil revenues to below 10 percent of Gross National Product.
Named the Mohammad Bin Rashid Fund for SMEs, this government initiative was established by a law issued by His Highness Sheikh Mohammad Bin Rashid Al Maktoum, vice-president and prime minister of the UAE and ruler of Dubai.
The fund offers two options: the Seed Capital Loan, which offers financing between 50,000 and 500,000 dirhams; and a credit scheme loan that uses money from banks and financial partners (which is then guaranteed by the government), which offers financing between 500,000 and 5 million dirhams. It offers interest-free loans for two years within a seven-year settlement period.
“We offer two types of loans, but we are not like a bank. We look at forecasting while banks look at history,” Abdul Baset Al Janahi, the chief executive of Dubai SME, told The National . “We are extremely flexible with regards to how and who we loan to. Any profit will be reinvested into the fund and redeployed. If the call on the fund is greater than our primary, we can leverage the asset of the Business Village.”
The only requirements for potential candidates is that the project needs to be fully owned by an Emirati, based in Dubai and the applicant must be between 21 and 65 years old. They do not require funds from individual applicants to start the business. Four applicants have been approved so far.
The aim of the fund is to inspire Emiratis toward innovation and creativity, in any sector. In addition to capital, the fund is working with the Hamdan Incubation Centre for mentoring and support.
Considering how key identifying funding is to kickstarting and sustaining a startup economy, it's hard to not welcome this initiative. But the loose requirements for candidates (from what has been reported so far) and seemingly disregard for the sustainability of the fund raises concerns of how much this will drive real entrepreneurship.
Dubai SME has said there will be accountability, through mentorship programs as well as progress reports and on-site check ups, but how strictly these are enforced remains to be seen.