DUBAI, Sept 9 (Reuters) – The United Arab Emirates will allow small and medium-sized businesses to use assets, including tools and raw materials, as collateral to secure loans, to encourage them to lend to them.
A federal law on “Securing Interest with Movable Property” expands the scope of previous legislation by including more assets that can be used as security and by other amendments that improve enforcement in cases of default.
SMEs often struggle to obtain financing for a number of reasons, including their size and the lack of a financial track record on which banks could base their lending decisions.
“This law allows companies operating in various sectors of activity, in particular SMEs, to benefit from their movable assets to guarantee their bank and commercial loans,” said Wednesday Younis Haji Al Khoori, undersecretary at the Ministry of Finance of the Ministry of Finance. UAE, in a statement.
The law “will help SMEs to easily obtain the necessary financing, by diversifying the financial assets that can be used, while guaranteeing the rights of creditors with banks and financial institutions,” Khoori added.
It comes during an economic downturn, as vital sectors of the UAE’s economy – such as retail, trade and transport – have suffered from coronavirus lockdown measures.
“This law will have a significant positive impact on the country’s economy,” Khoori said. (Reporting by Davide Barbuscia and Yousef Saba; Editing by Alexander Smith)