For the first time, Mohammed Bin Rashid Innovation Fund offer loans
The Mohammed Bin Rashid Innovation Fund (MBRIF), an initiative of the UAE’s Ministry of Finance (MOF) that is operated by Emirates Development Bank, issues bank guarantees to help finance entrepreneurs in the creative sector, but it does not currently offer start-up loans.
Dh2 billion government-backed fund to support start-ups in the UAE will begin offering direct, Sharia-compliant loans to recipients from this year, as it looks to bridge a gap in bank financing to entrepreneurs.
Dubai: EDB chief executive Haitham Kamhiyah stated, “Things were slow last year [when it came to making awards through the fund]”, “Banks find it risky to lend to SMEs on their own, so we want to move things along.
“We are reviewing our business plan and products for 2018 and are introducing a sharia-compliant loan from this year. We are hopeful that 2018 will be a very successful year.”
The fund’s committee has yet to agree how much of the fund’s total Dh2bn capacity it will contribute to through direct loans
The UAE wants the contribution of the SME sector to reach 70% by 2021 to help fuel the country’s non-oil GDP growth through a more diversified economy. But SMEs have been hit hard by the country’s economic slowdown in the past two years, as banks consider it increasingly risky to lend to less established operations.
The UAE Central Bank is devising initiatives to help SMEs gain extra access to financing at more accessible rates, together with revised rules and operating procedures for banks dealing with SMEs.
A committee meeting about plan discussed on Monday, Emirates Development Bank (EDB) will offer loans of up to seven years to MBRIF participants, at interest rates ranging between 7 to 9%.
According to Mr Kamhiyah, this is almost half the typical 12-14% market rates offered by commercial banks to SMEs at present.
MBRIF launched in 2016 and operations begun at the beginning of last year. It has supported three start-up projects to date, totaling around Dh15 million, through bank guarantees with the UAE’s Rakbank.
MBRIF is open to companies that are already operational and beyond the “ideation”, or concept stage, both globally and in the UAE, provided they have a base in the country.
They also must operate within industry sectors prioritized in the UAE’s National Innovation Strategy including;
- clean energy
- space and water
The fund will also consider other companies that contribute to the UAE’s social and economic progress.
Source: The National