Page 428 - Sustainable Cities and Communities Design Handbook

398 Sustainable Cities and Communities Design Handbook

The list of investment banks, wholesale banking, and companies that
conduct finance and investment activities is relatively short:

l Arab Emirates Invest Bank P.J.S.C., Dubai
l HSBC Financial Services (Middle East) Limited, Dubai
l Deutsche Bank AG, Abu Dhabi
l Industrial & Commercial Bank of China, Abu Dhabi
l Mubadala GE Capital P.J.S.C., Abu Dhabi
The UAE banking sector has served as an important element of growth
toward the diversification of the UAE’s growth strategy. It appears to be sound,
modern, and very competitive. Nevertheless, “Dubai SME,” part of the
Department of Economic Development, revealed that 86% of the SMEs have
not sought bank finance. It reflects how difficult it is for this sector to get a
bank loan. This shows the big gap between the government directives and the
banks’ policies. Bank financing is usually the only option, and is the pre-
dominant source of external financing for most SMEs. However, banks
consider SMEs to be relatively high risk, as most of their businesses are ser-
vice activities, and this leads to charging higher interest rates.
Most of the commercial banks are keen on funding the working capital
needs of businesses, but less on funding start-ups. Thus there is a need for
dedicated banks, working on commercial principles but devoted to financing of
the SME start-ups. Currently, not only the UAE but also the entire GCC lack
institutions that specialize in funding SMEs. Challenges of the banks in
serving the SME sector include:

l quality of financial reporting (usually poor, especially in the case of
microenterprises),
l lack of credit history,
l inadequacy of collateral (especially in case of start-ups),
l informal management (especially in micro- and small enterprises),
l short-term planning horizon,
l weak cash flow management.
Despite the structural challenges, innovation is widespread in the banking
community.

OTHER KEY PLAYERS OF THE FINANCIAL MARKET
72
Dubai International Financial Centre (DIFC) is a financial center that
offers a convenient platform for financial institutions and service providers
(financial intermediaries). The center was established as part of the vision to
position Dubai as an international hub for financial services and as the regional

72. http://www.difc.ae/.