ABU DHABI — The SME sector in the UAE has emerged as a dynamic force, propelling the nation’s economic landscape into new dimensions. With an impressive 63.5 percent contribution to the non-oil GDP, SMEs have become the backbone of the UAE’s economy.
This surge in growth can be attributed to a supportive ecosystem, entrepreneurial spirit, and government initiatives. However, like any thriving sector, SMEs face challenges that require strategic solutions for sustained success.
The SME market in the UAE is experiencing a vibrant period, driven by the post-Covid wave that has stimulated growth across various sectors, especially in technology and digital companies. Thanks to their entrepreneurial mindset, a distinguishing feature of SMEs is their agility and rapid innovation capabilities. As Ayham Gorani, Co-Founder and CEO of Pemo, observes, “Successful SMEs know their business, their customer, and how to spot the right talent to elevate them to the next level.” This has led to a thriving ecosystem significantly contributing to the non-oil GDP.
Challenges Faced by SMEs
Despite their remarkable growth, SMEs in the UAE encounter challenges, as highlighted by Ayham Gorani. A primary challenge is introducing innovative products or services to markets unfamiliar with such offerings. For example, Pemo faced the task of creating market demand for its unique product from the outset. Additionally, it experienced hurdles in onboarding customers, particularly in the Know Your Business (KYB) process. Gorani emphasizes the importance of staying focused and determined, optimizing processes incrementally to overcome such challenges.
The Significance of a Supportive Environment
With 557,000 SMEs in the UAE, maintaining a supportive environment is crucial for attracting entrepreneurial minds and talent to further grow the market. Gorani asserts that a business-friendly ecosystem is fundamental for SMEs, enabling them to focus on building and growing their enterprises. Simplifying bureaucratic tasks such as business setup costs, banking procedures, and visa management is essential to ensure founders can concentrate on core business operations without unnecessary distractions.
Abu Dhabi’s Startup Landscape
In the past three years, Abu Dhabi has witnessed remarkable growth in the startup sector. It has become one of the leading centers for innovation and entrepreneurship in the region, strengthening its position as an incubator environment for startups and medium-sized companies. This development has been a primary engine of the national economy and a fundamental pillar in achieving sustainable development.
SMEs are the backbone of healthy economic growth, contributing to diversification, job creation, and establishing new revenue streams.
Ayham Gorani, Co-Founder and CEO of Pemo
Startups in Abu Dhabi: A Significant Growth Trajectory
According to monitoring by the Emirates News Agency, WAM, based on official data from the Abu Dhabi Chamber of Commerce and Industry, startup companies in the Emirate of Abu Dhabi achieved remarkable growth at a compound annual rate of 14 percent from 2021 to 2023, totaling 67,085 companies.
The year 2023 marked a qualitative leap for Abu Dhabi in terms of the growth in the number of startups and medium-sized companies. This reflects its leadership in the development of these companies by providing various privileges and activities introduced during the past year to attract startups and launch their businesses in the emirate. This contributed to attracting 25,016 companies during the past year, compared to about 22,810 companies in 2022 and 19,259 companies in 2021.
The attractiveness of Abu Dhabi’s investment environment over recent years has led to the inclusion of thousands of startups and medium-sized companies operating in various fields and activities. According to data from the Abu Dhabi Chamber, the three most prominent sectors for startups and medium-sized companies are the wholesale and retail trade sector, comprising about 39 percent, followed by the construction sector with 16 percent, and the support and management services sector with 8 percent.
SMEs and UAE’s Ambitious Economic Growth Targets
SMEs play a pivotal role in achieving the ambitious economic growth targets set by the UAE’s D33 goals. Ayham Gorani notes, “SMEs are the backbone of healthy economic growth, contributing to diversification, job creation, and establishing new revenue streams.”
As the UAE aims to double its economy by 2033, SMEs will be instrumental in realizing these objectives, playing a vital role in creating a sustainable future for the nation.
Gorani highlights the intrinsic link between the SME market and the D33 goals, influencing business strategies. As an SME, Pemo understands the pain points of startups and utilizes this insight to address the spending management needs of SMEs. By digitizing spend management processes, Pemo contributes to easing the operational burden on SMEs, allowing them to focus on growth.
Government Initiatives for SME Growth
For sustained SME growth, Gorani emphasizes the need for continued government initiatives and policies that foster a favorable environment.
In an interview with TRENDS, Ayham Gorani emphasizes the importance of upgrading regulations to support complementary players like fintechs. He advocates for creating technology hubs to foster collaboration and investing in talent development through academic institutions. To continue attracting entrepreneurial minds and talent, the UAE should maintain an innovative and open mentality in policymaking across sectors.
Gorani suggests that policies such as digital asset regulation, startup-friendly policies, business facilitation, and tax incentives are key to fostering SME growth. Additionally, the UAE should uphold its reputation as a world-class place to live and work, ensuring a comprehensive approach that supports both business and personal life.
The Entrepreneurial Experience in the UAE
As an SME owner, Gorani identifies the need for a smoother financial experience for SMEs. He underscores the importance of reducing bureaucratic tasks, allowing business owners more time to focus on running and growing their enterprises. Gorani highlights that successful SMEs become drivers of new industries, signaling a robust economic backbone for a growing country like the UAE. The constant movement, adaptability, and innovation within SMEs align well with the entrepreneurial spirit of the UAE, contributing significantly to the nation’s ambitious economic vision.
Feedback for Policymakers
As the UAE aims for accelerated economic growth, Gorani suggests that policymakers favor controlled experiments to advance innovation rapidly. Allowing experiments in digital transformation, akin to the VARA regulation, helps the UAE remain competitive, attract talent and entrepreneurs, and drive growth.
The SME market in the UAE stands as a testament to the nation’s commitment to fostering innovation, entrepreneurship, and economic diversification. With a supportive environment, strategic initiatives, and visionary leadership, SMEs have propelled the UAE towards its ambitious financial goals.