SMEs: No Rags to Riches without training

 An SME Academy now in the UAE to support Gulf Entrepreneurs

Abu Dhabi, 15 October 2016

“There was a time when one could start with a good idea at the right place at the right time. Those days are gone”. Mohamed Mahari, a Corporate Credit trainer at Moody’s, likes to start his training sessions with a strong statement like this one he used in front of about 35 small-and-medium sized enterprises (SME) last September in Abu Dhabi. After catching the business owners’ attention, the charismatic speaker went on: “The typical UAE story of rags to riches where someone with a basic academic background but a vision and a determination to work hard could make it to a business empire no longer works. Anybody starting a business today is competing with the best and with the rest of the world, in an environment that has become much more sophisticated.”

Indeed, it has never been more critical for businesses to equip themselves with the right skills. A massive 82% of SMEs fail within the first three years of activity, for mainly two reasons: lack of finance and a shortage of skills.

Still, companies of this size are the backbone of the country’s economy, as figures published by the Khalifa Fund for Enterprise Development clearly show: there are about 300,000 SMEs across the county which accounts for 94% of all businesses and employ nearly 90% of the private sector’s workforce. The sector has the potential to add $100 billion to GDP as well as generate up to 2 million jobs in the GCC in the coming years, according to estimates from AT Kearney. It already contributes 60% to non-oil GDP, according to the UAE Ministry of the Economy, which is why the Abu Dhabi Economic Vision has placed them on its priority list. Government initiatives such as the Khalifa Fund and Dubai SME try to bridge the gap by providing funds along with private initiatives.

Money is not everything

But money is not everything, as the 35 SME owners listening to Mr. Mahari have learned. They had come to Abu Dhabi on a Sunday morning to attend the first module of the newly launched “SME Academy”, a training programme sponsored by the National Bank of Abu Dhabi (NBAD), in collaboration with CPI and Etisalat. Although like other banks, NBAD has limited credit exposure towards SMEs, it is still providing finance to smaller businesses in various forms, including trade and working capital facilities, invoice discounting and guarantees.

But the country’s largest bank by assets also wanted to go the extra mile in the area of skills. This is how the idea of an academy was born, with a view to addressing the general skill gaps. The programme, which is still in the pilot phase, currently consists of a series of five skill-building workshops which focus on practical topics designed to help SME owners make the right decisions for a successful business.

“Last year, we made a commitment to support the growth and development of the country’s SME sector as part of our Corporate Citizenship strategic initiative,” said Alex Thursby, NBAD’s Group CEO. “In our first year, we have successfully built and launched the SME Academy, a unique platform which provides practical and relevant content to help SMEs to realize their ambitions. Our goal is to nurture the entrepreneurial spirit of the region and ultimately to help to build a strong SME sector in the UAE through the SME Academy.” NBAD expects that the strategy to help smaller businesses reach the next level and qualify for larger funding facilities will be both a philanthropic venture and an economic win for the bank in the longer run, as the size of the programme grows.

Business owners involved in the programme have shared common challenges. “I have never used finance facilities from a bank. But now that I have 2 branches in Abu Dhabi and in Musaffa, I am thinking of taking out a loan to open a third one,” said Vadivu Muthuraman, the academic director of Best Kids Brain Skill Development Centre. It took her a year to open her business due to changing regulations in her field. She now employs 12 people who teach maths and abacus to improve children’s concentration and memory power. Now that it is up and running, she is looking to expand but the main thing holding her back is capital, in addition to a lack of understanding regarding banking processes. “I am a technical engineer and I don’t know much about banking processes and accounting. I found this kind of programme excellent for SMEs. Personally I am not aware of any other bank doing this.”

A free training programme open to all qualifying SMEs

Each of the Academy’s workshops is delivered free of charge by expert institutions, including Moody’s, Association of Chartered Certified Accountants (ACCA), PWC, Hawkama and best-seller author and consultant Ron Kaufman. “The two Moody’s speakers were very engaging”, Beverly Ravisankar, the CEO of Tech World Consultancy said. “There were about 8 round tables and in one of the group exercises, each table had to reflect on the challenges that SMEs faced with banks and then write them down on a white board.” Like all the attendees, Mrs. Ravisankar discovered that most of the SMEs faced the same top 5 problems, though in differing orders: documentation, high interest rates, 100% cash deposit requirement for a guarantee fund, and lack of clarity in terms of risks. “It was nice to see that everyone had the same kind of problems, which then made it easier to think about the solutions.”

Kingson Jebaraj, the founder of IWET, a company focused on commercialising advanced water and energy solutions, also attended the first module: “It was very helpful in terms of understanding how banks look at a client,” he said. “After working for 10 years at CoolTech, a division of district cooling company Tabreed, I started my own business. The main problem we face today is working capital, owing to our quick growth. That’s where I need a bank’s support most”.

Even though the SME Academy is open to businesses that don’t bank with NBAD, not every SME is eligible. To enroll, an interested SME must have been trading for a minimum of two years and have a minimum turnover of AED 5 million a year. As a result, only 24,000 companies out of the country’s 300,000 qualify. “At this point, focus is on content that supports businesses in early growth phase. Nilanjan Ray, Managing director of Global commercial banking at NBAD in Abu Dhabi explains. “We intend to support start-ups at a later stage during the evolution of the SME Academy.”

SME owners face common pitfalls

As the head of a 9-year-old business with 25 employees based in Dubai, Mrs Ravisankar qualified. Her consultancy provides e-learning solutions for large corporates in aviation, oil & gas, defence and manufacturing, but also supports other SMEs in their business. When she received an invitation from CPI Media to benefit from the Academy attend she did not hesitate to do make the trip to Abu Dhabi and Dubai. “I also attended the second workshop focused on Understanding the principles of accountancy. The speaker was the Middle Eastern head of ACCA. She did not teach us how to build a balance sheet or cash flow but instead explained what is way more important to SMEs: why accounting is a crucial part of our business and what it is SMEs should be looking at in our financial document,” Mrs Ravisankar said. “The crowd was very engaged. To be honest, most entrepreneurs don’t really know what to look at when they see their financial statements. So we learned what questions to ask our accountants in order to get the answers to understand how we are doing: am I making a profit? And if yes, what kind of profit?”

The most useful thing she took away was the list of the typical pitfalls faced by smaller businesses: failing to adapt to changes of the environment (internal and external), an inability to understand the strategic drifts of the market, coping with growth, managing working capital and budget forecasting as well as an overall inability to manage accounts.

Upon completion of the courses, SMEs are provided with a Certificate of Completion, which can serve as reference collateral for formal discussions with banks, accountancies and public sector entities, as well as benefit companies when applying for competitive tenders or working in public-private partnerships

Feedback from attendees so far has been widely positive, according to organisers from both NBAD and CPI Media. Some of the attendees made a few suggestions for the year 2016-17, such as Julia Stolyarova, the Director of Vinci Solution, a consulting agency specialised in software implementation : “I came all the way from Dubai to Abu Dhabi to attend the session on “How to be bankable”. The main thing I noticed is that the content has not changed. I have been running my own company for seven years now in this region. Whatever was said about SMEs challenges with banks and the government has not changed since. Challenges remain the same. I personally would love next time to see a session on how to get the actual financial support. Also, are the banks doing their work of talking to the government to get more easy procedures for us? I hope they do.”

All the feedback collected as the Academy’s curriculum unfolds throughout its pilot year will serve as a base to develop next year’s offering of the SME Academy. In the mean time, a third module will take place on 16th and 18th November, in Abu Dhabi and Dubai, with a focus on Understanding corporate governance, a topic that if not well understood, can sometimes hamper SMEs commercial growth as they fail to meet stakeholders’ obligations.

Nathalie Gillet
Editor, NBAD

SME Academy Calendar 2015-16

  Date Theme of the Workshop Experts and Partners
1 06 September 2015
13 September 2015
How to be bankable Mohamed Mahari (Moody’s)
2 05 October 2015 Accounting practices ACCA
3 16 November in Dubai
18 November in Abu Dhabi
Understanding corporate governance Hawkamah
4 18 February 2016 Low-cost marketing techniques for SMEs Dr. Constantine Dino Kiritsis (PwC)

26 April 2016

Attaining leadership in Customer Service Ron Kaufman