New 'SME Protect' insurance launched for UAE-based trade companies
Etihad Credit Insurance (ECI) — the UAE Federal export credit company — has launched a new specialised insurance cover for UAE-based trade companies. The purpose of the new insurance product is to help SMEs grow their business globally and enter into high- markets.
As a "trade credit solution", SME Protect will enhance the global competitiveness of trade companies operating from the UAE. The cost effective insurance will be available to exporters as well as re-exporters from 1 September 2019 onwards.
With SME Protect, trade companies can move away from the limiting and traditional Letters of Credit or cash payments terms, towards the most updated sales on open credit terms. This will help them expand their operations to more countries with less hassle of paperwork.
Massimo Falcioni, the Chief Executive Officer of Etihad Credit Insurance revealed that "The SME Protect Trade Credit solution is a result of the survey that was conducted in 2018 in co-operation with Abu Dhabi Chamber of Commerce, Dubai Chamber of Commerce, and Ras Al Khaimah Chamber of Commerce."
The survey showed that 97 percent SMEs still prefer Letter of Credit and cash payments whereas only 3 percent prefer selling on credit. ECI, in line with its mandate, has endeavoured to fill the gap to ease of doing business, accelerate the SME growth and sustain the non-oil foreign trade growth development in the UAE.”Massimo Falcioni, CEO of Etihad Credit Insurance
The 97 percent of SMEs in the trade sector still preferring Letter of Credit and cash payments, per survey results, indicates a strong hesitation in the market against the potential of non-payment. This trust issue can often be a road block in business expansion, especially in stronger growth economies where importers have multiple insurance options protecting their interests.
Moreover, for many SME dealing in the trade sector, extending a line of credit is considered risky and even a hinderance against continuity of business due to cash deficit.
According to the Federal Competitiveness and Statistics Authority, the contribution of the SME sector to the UAE's GDP is estimated at 53 per cent in 2019, up from about 49 per cent in 2018. The Federal government aims to increase this rate to around 60 per cent by 2021, underscoring the importance of this sector, which encompasses around 95 per cent of the firms in the country and employs 86 per cent of the total workforce in the non-oil private sector.
“The UAE government is committed to boosting the contribution and performance of local SMEs and has taken a leading role in establishing strategic initiatives to support funding for the sector. ECI’s newly launched ‘SME Protect’ will assist exporters and local businesses to access highly competitive global markets.”H.E. Engr. Saed Alawadi, Chief Executive Officer of Dubai Export Development Corporation, Board Member and Chairman of the Executive Committee at Etihad Credit Insurance,
The launch of ‘SME Protect’ for UAE businesses is aimed at supporting SMEs towards "safer trade, and high-growth at different stages of their life cycle," said Massimo Falcioni. In line with the Federal government's vision to support SMEs who already contribute to a large chunk of the country's GDP, this new credit solution is aimed at helping SMEs grow stronger and expand to strong growth markets.
