DRIVE TO SUCCEED

Abu Dhabi 2017 | ECONOMY | VIP INTERVIEW

TBY talks to Abdullah Saeed Al Darmaki, CEO of Khalifa Fund for Enterprise Development, on changing attitudes toward entrepreneurship and developing the Emirati SME brand abroad.

In light of the upcoming 10th anniversary of Khalifa Fund, what is your assessment of the institution's role in financing SMEs and startups and what setbacks has the institution overcome along the way?

Since its inception, Khalifa Fund has worked on two main pillars. Those were primarily on fostering entrepreneurship among the country's population and direct financing of small business, particularly startups. I would say the first few years were challenging from the perspective of managing expectations. Entrepreneurship should be perceived as a viable career opportunity, instead of the typical search for a public sector job. We embarked on a series of strategic initiatives that engage with the communities and institutions that have outreach programs. Furthermore, we conducted hundreds of awareness campaign programs and activities through academia and NGOs, in order to encourage the young population to explore the opportunities provided by entrepreneurial activity. On the small business financing side of our mandate, we started with one financial product and gradually created more products that fit the different demographics of the applicants that came through our door. With that we started to see a surge of interest, moving from an average of about 50 applications to over 300 per month. I would also attribute that notion to the fact that in 2009 our mandate was expanded to cover the whole of the UAE and that brought more interested parties forward. Of course we cannot forget the period of time when the Global Economy went through some turmoil and much of the region was affected by it. Needless to say that SMEs were faced with similar challenges especially due to the fact that the service sector was one of the areas most affected in this region. However, over the past several years we at Khalifa Fund have been able to devise a mechanism through which we can closely monitor the different economic sectors within the UAE, and accordingly come up with targeted policies to support SME growth or limit them for a period of time.

What has been Khalifa Fund's strategy for effectively allocating available resources and encouraging other entities to expand their funding and mentoring capabilities?

I would like to start by thanking all those institutions, domestic and international, who recognize that SME growth is very much the backbone of robust economic growth and even more in the UAE. Accordingly the fact that they have participated in that strategy directly was very influential for keeping communities interested in this area. Furthermore, the recent introduction to the definition of SMEs paves the way for organizations such as Khalifa Fund to have more constructive dialog with financial institutions and to increase their financial and technical participation in SME growth across the country. We have also been privileged to work with several NGOs to mentor would-be entrepreneurs on the main traits of enterprise creation and overcoming some of the stigma that is affiliated with that motivational drive. One of our most recent achievements was working with the Ministry of Social Affairs to establish the first association that represents SMEs. This gives the entrepreneurs a voice and lobbies entrepreneurial interests before governmental institutions and ministries. We have also noted the need for an angel investor network across the Gulf region and have identified a number of individuals that could get involved as financiers and mentors for distinguished Emiratis.

How will the recent move from the Ministry of Education to include innovation in its parameters encourage educative centers to develop the entrepreneurial ecosystem in the UAE?

I believe that it will enhance the Ecosystem within the UAE. We at Khalifa Fund believe that innovation takes different shapes when it comes to surviving in a competitive economy, especially when you have new business coming from regional and international destinations. Without that crucial parameter young business will tend to struggle and at times fail. At times we at the fund have seen several business owners completely change their business model/operations and try to innovate so as to be able to grow that business and address new opportunities.

What are the main constraints in fostering entrepreneurial mindsets among young Emiratis and how can these effects be reversed?

The first step to tackle that is at a grassroots level. Young people in primary and secondary schools need to be exposed to these ideas, and be encouraged to possibly become entrepreneurs in their own respect. We also acknowledge that gaining experience in the “world of work" builds character for those UAE graduates and we welcome a period of time where they gain work experience. I have personally worked with the European Union Commissioner Office to create ties with other international institutions who are willing to provide some level of skills development for business owner startups. That is still in the works. We continue to address the stigma linked to self-employment and which needs to be addressed if we want to see a new generation of entrepreneurs. There continues to be a lot of work done by schools, universities, and governmental agencies to change this perspective and that is why we have always said that this will be a collaborative effort for all related parties.

What are the key assets an SME has to have to be successful in this market?

Entrepreneurs are unlike any other professionals. This whole notion of embracing failure, taking on new challenges, and being receptive to the idea that others can facilitate your business opportunities exist around the world, and we are working hard to bring those ideas and general culture to our society. Let us not forget that global indicators for small business startups can reach up to a 78% failure rate. Unfortunately, these figures deter people in our society from venturing into entrepreneurial initiatives and this is the type of mentality we are trying to change. However, on the other side of the spectrum, venture capitalists are always on the lookout for those who have faced multiple sets of challenges in starting a business simply because that is a good indicator of one's hunger to succeed. Entrepreneurs need to address ongoing challenges head on before they can rise to the top. It is honestly a cultural challenge, whereby culture has to acknowledge that failure is always a good indication of how much determination an individual or group of people can or should have to succeed in a constantly-changing economic landscape.

Which sectors of the economy hold the greatest potential for the next generation of SMEs and startups?

SMEs are the main pillar of every sector, from hydrocarbons to tourism, and from F&B to ICT. Given the current financial restraints in the market, there are some sectors that cannot build momentum for the development of SMEs, such as manufacturing industries for small business. Tourism remains the leading sector for SME activity, with social media following closely as it develops rapidly in the Arab world. Of course F&B remains the bread and butter for SMEs and startups to open niche markets and expand to foreign markets. It is refreshing to see wave after wave of young, ambitious entrepreneurs coming into the market regardless of the industry they operate in.

How has Khalifa Fund contributed to building the brand of Emirati SMEs around the world?

We have seen a good number of Emirati SMEs successfully expanding their horizons to regional and global markets, even competing with well-established international brands. Part of our job is to connect our entrepreneur talent pool, with the recognized names and private institutions out there that are eager to work with this new breed of talents. We as Khalifa Fund have an obligation to engage with the wider demographics of society here in the UAE, and I can safely say that through our leadership from HH Sheikh Khalifa Bin Zayed, the president as well as his brothers have been very satisfied with how this organization has engaged with society in creating an entrepreneurial environment. This confidence from our leadership has involved us in international SME development activities as part of the UAE's geopolitical agenda. We were one of the first governmental institutions to participate in economic development in the Republic of Egypt. We work with well-established SME development institutions on the ground in all 27 provinces to support small and home-based business with a focus on micro financing for the youth and female populations. Furthermore, we have started to mobilize our teams into working on establishing an SME Agency in the Republic of Chechnya (again as part of that leadership agenda), and we are working with the Russian Federation Institution who have a vested interest in seeing ongoing economic growth in the CIS. The objective from our leadership is that we as Khalifa Fund have built a wealth of knowledge and know-how in this area, and we are now transferring that knowledge and providing capacity building for entrepreneurs in different countries. Going forward the notion is to move away from the traditional patriarchal ways of donating money and aid. Finally, I would like to highlight that through the vision of our Chairman HE Hussain Al Nowais and the Board of Directors we have built and begun implementing sustainable operating models that I believe we can replicate with our partners going forward. We hope to share more on that next year.