TBY talks to HE Abdul Baset Al Janahi, CEO of Dubai SME, on the new bankruptcy law, the role of SMEs, and incentivizing people to start businesses in non-traditional sectors.

HE Abdul Baset Al Janahi
HE Abdul Baset Al Janahi graduated in business administration from the Higher College of Technology in Dubai. He has been in his current position since 2002 and has previously held a number of senior managerial positions in leading organizations in the UAE. He was a founding member of the Dubai Shopping Festival, and later moved to Dubai Internet City in 1997 as one of its founding members. In recognition of his strategic and business development capabilities, he was selected in 2001 to join a taskforce responsible for setting up the Dubai Development and Investment Authority, later renamed Tatweer.

How will the new bankruptcy law benefit the SME sector across Dubai?

The new bankruptcy law will definitely enhance the ecosystem for SMEs in the UAE. This will impact the financial sector for both lenders and borrowers. Both sides will undergo a major restructuring in the way they operate. For the financial sector, the current situation will move away from dependence on guarantees and collateral from SMEs. Financial institutions will have to go into the details of how these businesses work and understand their operations more closely. With the insolvency law, if someone files for bankruptcy then it stops there. This will have a positive effect on the economy and entrepreneurship because people will be less afraid to fail. Alongside the insolvency law and the VAT, bookkeeping, forecasting, and creating a five-year plan will be more important.

There are many new styles and platforms coming into the market, such as fintech. How can they be integrated successfully into SME financing while maintaining security and stability?

Fintech has generated a lot of attention, but in terms of regulation many central banks are not yet ready for it. Our government is working on it, but generally the sector is a little foggy when it comes to fintech. There is always the fear among the banking sector about who can regulate these companies, in part because companies can be created anywhere in the world and operate here. It can be very difficult, but the best way would be for regulators to get involved sooner rather than later. As usual, regulation takes time. For example, Uber disrupted the taxi business, and regulators had to react to the market rather than dictate how it is run. The same thing will happen here. Entrepreneurs and innovators come up with ideas and explore new landscapes, then regulators come in later and get involved in a good way.

How is Dubai SME working with the 350,000 SMEs in the country to adapt to new legislation?

When we started in 2012, we had 1,000 SMEs, and by 2015 we had close to 4,500 companies submitting their financials to us. Change takes time, and with the insolvency law and the VAT, these businesses have no choice; they have to manage their finances in compliance with the law.

What makes five-year plans so critical to the success of an SME?

From our experience, SMEs usually operate on a three to six-month plan, which is not ideal. With everything that is happening with technology, oil prices, and regulations, it is difficult to have a five-year plan. It is hard, but this constitutes the difference between a good SME and an average one. At the end of the day, an entrepreneur is not starting a business for fun. There is a dream behind it that needs to be implemented according to a plan. Without proper planning, they are bound to fail. Globally, 80% of SMEs fail, but in Dubai it is about 65%, a much stronger figure. It is not only about money. Moving forward, Dubai and the GCC will be very competitive. In terms of staff, these SMEs often look at employees and assume they will leave due to a high turnover rate in the region. There is even a high turnover rate with senior staff. To increase retention, businesses should look at employee share options, long-term planning, buying, and the overall sustainability of these business.

What can be done to incentivize people to start SMEs in nontraditional sectors?

In terms of incentivizing, the government's Islamic economic and industrial strategy, as well as Dubai's SME rating strategy, is a huge help. As part of RATE SME, we look at whether it is aligned with Islamic principles and, if it is industrial, then it will be ranked higher. If you have a governance system and the SME is more environmentally and socially conscious, it will be ranked higher