The Intelligent SME Issue 21 by SPI Publishing

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ISSUE: 21 | AUGUST - SEPTEMBER 2014

Enabling Global Ambitions

The lords of finance An increasing number of banks and financial institutions are jumping into the SME financing bandwagon across the region. There is a lot of profit to be made. ISME investigates.

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Contents August-September, 2014

The lords of finance An increasing number of banks and financial institutions are jumping into the SME financing bandwagon across the region. There is a lot of profit to be made. ISME investigates.

13 Rare & Fabulous

High-end luxury products for CEOs and decision makers.

18 Business Announcements

What's happening in the business marketplace? Here are some updates that you might have missed.

20 Separating the zeroes from heroes “If you want to be successful in life, find a way to serve others,” advised America’s hippest motivational coach, Jairek Robbins, at his debut seminar held in Dubai recently.

Less on selling, more on earning confidence

A solid team and the right tools to bridge the funding gap could soon help you climb the success ladder, writes Alexander Williams.

'Compromised quality can hinder progress'

Catering to the millions of migrants and under-banked population in rich countries, UAE Exchange, helps them send money to their families across developing countries on a regular basis. Unlike bank fund transfers that can take two days or more for a recipient to get cash, UAE Exchange is somewhat different, as it enables instant transfers in cash through its worldwide footprint.

38 Seamless SME financing solutions, still a challenge?

Lack of SME credit rating agencies to assess risk, lack of an asset / collateral that can be used for SME financing transactions, lack of sophisticated risk management systems, and need for development of a strong and transparent financial infrastructure are a few challenges faced by lenders, writes Sheetal Kothari.

40 RAKBANKâ&#x20AC;&#x2122;s 360-degree formula for success

With market foresight and consumer behaviour study forming the basis of their business strategies, RAKBANK has consistently strived to be innovative and creative with not just their many offerings, but also their advertising and marketing campaigns. Banali Malhotra, head of marketing, RAKBANK reveals to ISME the pre-requisites for a successful communication and marketing strategy.

off the ground requires a hefty stack of cash. Unfortunately, finding funding options to empower your dream venture can be a taxing exercise. Simon Hodges shares few tips to help you avail the best finance deal for your business idea.

Stepping into the market to secure funding for your start-up could be a daunting and rigorous process. Across the UAE, it not only requires defining your business modelâ&#x20AC;&#x2122;s potential and position in the market place, or, simply put, the USP of your products/services, but also three years of audited financial receipts to showcase stability. And thus, to ramp up support for the development of the SME sector, the Shariâ&#x20AC;&#x2122;ahcompliant finance company, Aseel Islamic Finance, has launched a business solution recently.

50 5 tips to find funding for your start-up

Start-ups require a bit more nourishing than established entities. And to this end, several businesses wallow in early development due to the lack of enough learning to execute their ideas, super slow social skills, failing to adhere to a tight budget, etc. Phil Bedford breaks down a list of things you should consider and prepare before you jump into launching your business.

54 Time to bridge the financial literacy gap

48 Transforming lending norms for SMEs, the Aseel Islamic Finance way!

Weighing the risks before starting up a business

Not everyone is a wiz at number crunching. Majority of small business owners are idea-driven people. But reality comes at you hard! So, educate yourself, get a good grasp on finances and cash flow, as this will help you make sound decisions and keep your company thriving, writes Neil Petch.

60 Banking on good governance

The reasons for the global financial economic crisis were many and varied, poor corporate governance lay at the heart of the matter. Not only in the sense of leading to illegal activities, but also in the wider sense of enabling incompetence and poor-decision making, points out Mark Fisher.

62 Tall traits for playing 'follow the leader' game

Entrepreneurs are full of powerful ideas and strategies to implement, but getting the idea

Leaders who discipline themselves to consider others around them as being an extension of themselves will easily get others to want to follow them. writes Michael J. Tolan.

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Publisher & CEO Shantanu A.P. Account Director Vijay G. Editor Samar Manzar Asst. Editors Nikhil Pereira,

Amey Borkar

Consulting Editor Utpal Bhattacharya

Editor’s Note I have been speaking to a number of entrepreneurs in the region, and a majority of them believe that we have a real potential of creating a Silicon Valley like environment in Dubai. Of course, that cannot happen unless we have all ingredients in place, and especially those that have helped the Silicon Valley to be what it is today. Most entrepreneurs that I speak to keep insisting that they have “an absolutely amazing idea”, but no money. Investors and banks, on the other hand, emphasise that only few ideas can receive their support. Thus, the key question remains: how to create an innovative ecosystem where these ideas and business propositions are made relevant through a dynamic interaction of public and private investments?

Expert Contributors

Karen Osman Mark Fisher John Merrigan Michael J. Tolan Neil Petch Phil Bedford Sandi Saksena Simon Hodges Zeyad Ahmed Abd El Aziz Zed Ayesh

Art Director Aneesh Varghese Designer Retheesh Viswanath

Employing nearly 42 per cent of private sector workers in Dubai, SMEs account for 95 per cent of the total enterprise population in the emirate, according to a Dubai SME’s 2013 report. Realising the unstated fact that the sector is highly dynamic, experiencing frequent births and deaths as companies are established, acquired, and in some cases closed, the ISME team has compiled a special edition on the banking and financial services segment to provide timely insights, clear focus and address the challenges faced by start-ups in the region. The exclusive report (Pg 33-49) concentrates on how the window of evolving customer needs and the emergence of new players and technologies should be utilised by established banks and financial institutions to capitalise on the growth potential offered in the SME market. It also outlines the shift in focus needed by SMEs to maintain their stake in the game: embracing best practices, client-centric strategy, learning from successful industries and much more. A detailed guide on the revolution and innovation needed in the SME space to get the ball rolling.

Web Developer Raj Shekar Reddy Business.Dev. Manager Nasim Akhtar Response and communications

Response Executive Evelyn V.B. MIS Executive Yolanda Pedemonte Distribution Department

Jerry P. Sam Editorial Enquiries & Contributions

% 04-2659704, 04-2650312 Fax: 04-2690566 editor@theintelligentsme.com

In addition, two interesting stories on niche e-commerce business ventures finds its way into the edition. These companies, fairly new, have a promising trick to turn the tech wizardry into magical profits. Lastly, the Emirates NBD Global Business Series will celebrate the life and work of Avishesha Bhojani, group chief executive officer at the Bates PanGulf, this month, the pioneer of Dubai Shopping Festival and Dubai Summer Surprises. An advocate for building businesses, building ideas and doing things in a smarter way, every day, the session is likely to provide rare insights on doing business in this part of the world. Watch out for our next edition to read the exclusive report.

% 04-2659704, 04-2650312 response@spiholding.net

Advertising Enquiries

As always, your feedback is valuable, and since I am always on the hunt for people and companies to profile, do write to us with your suggestions at editor@theintelligentsme.com

Subscriptions Enquiries:

Samar Manzar

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Disclaimer

SPI Publishing has endeavoured to bring out a publication that is reliable and informative. This is true to the best of our knowledge. The opinions presented are those of individual writers and not necessarily endorsed by SPI Publishing. The content in this magazine is protected by copyright law and is copyright to SPI Publishing unless credited otherwise, and may not be copied, reproduced or republished for any commercial purpose or financial gain.

S U C C E S S I S A D E S T I N AT I O N

H AV E YO U A R R I V E D ?

WATCHES YACHTS DESIGNER JEWELLERY BOUTIQUE REAL ESTATE GADGETS EXOTIC DESTINATIONS FINE DINING

August - September '14

Intelligent SME

Rare & Fabulous

Euphoria, feminity redefined E

Approximately AED 5,000/-

xceptional through its femininity, elegance and the beauty of its lines, Saint Honore has combined the cushion shape with feminine style in a refined, graceful and immaculately finished timepiece called Euphoria. The completely new Euphoria stands out with the cushion shape and curved corners of its 35 mm case that will attract the female eye. Women will be equally captivated by the pink PVD detailing, the warm colour contrasting with the metallic tone of the steel. A perfect example of this elegant combination, the two-tone bracelet, made up of gently curved links, sits perfectly on the wrist for a supremely comfortable wear, while the delicate grooves on the crown, topped with a black onyx, are reflected in the polished case middle. The Euphoria’s dial features a number of attributes that affirm the feminine appeal of this timepiece, a prime example being the 11 diamond hour-markers that illuminates the azure rim surrounding the white mother-ofpearl centre. These brilliant gems are held in place by claw settings with a pink PVD finish, mirroring the stylised figure 12 and the luminescent hands. A beautiful ode to femininity, the new Euphoria, Swiss-made like all Saint Honore watches, is sure to arouse much envy. Since 1885, Saint Honore has been synonymous with the famous “Paris style” and has been manufacturing collections of unrivalled creations of watches, jewellery and accessories. Throughout the world, its elegant style and watchmaking expertise attracts lovers of contemporary design. Offering all the assurance of Swiss Made quality, its timepieces have a unique character and are crafted in the finest materials with eye-catching details.

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Intelligent SME

Rare & Fabulous

The luxury of leather M

ontblanc, known for its classically and distinctively masculine jewellery lines, adds a new dimension to its Monograin Collection of oxidised sterling silver accessories, with the introduction of another distinctly masculine feature, leather. This is the first time that leather has been used in this manner and so identifying the best way to work with it required a considerable investment of time and effort. For example, embossing leather can sometimes flatten surfaces but Montblancâ&#x20AC;&#x2122;s ateliers have managed to add the Grain de Riz motif to the leather in this case while maintaining a rich, deep and tactile surface. Technology aside, the jewellery designers also had to source a variety of different

leathers that could withstand the impact of the embossing process. The skin that meets the requirements to withstand the pressure of the embossing process, was bull hide. To match the strong, simple and masculinity of the patterns and materials the designers chose a colour palette of dark grey. The leather inlay has been carefully positioned to ensure that it is centred and balanced. The sizes of the pieces and lengths of chain, for instance, have also been minutely calculated to match their design and to appeal to a male audience. The collection includes a pair of cufflinks, a pendant and a bangle that exhibit the same understated elegance, and are destined to be classic lifetime companions for a man.

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Intelligent SME

Rare & Fabulous

Samsung introduces high-end LTE dual-SIM smartphone S New Dual-SIM smartphone connects work and life with the best features of the Galaxy S5

amsung have announced the dual-SIM iteration of their flagship Galaxy S5; the Galaxy S5 DUOS LTE. The first dual-SIM flagship smart phone from Samsung combines the flexibility of two numbers and two mobile plans with all the premium features of the Galaxy S5. “Dual-SIM is a great option for people who want balance in their work and social lives, but it has never been available on

AED 2,599 16

a true smartphone. By bringing dual-SIM to the Galaxy S5, we have made sure that consumers no longer need to compromise on the features, apps and connectivity that they crave,” said Mr. Hayssam Yassine, head of telecommunications group, Samsung Gulf Electronics. “With the Galaxy S5 DUOS LTE, our customers have access to Samsung’s premium hardware and world-class apps across two SIMs.” Helping users keep true to both social and work commitments, the Samsung Galaxy S5 DUOS LTE comes equipped with Samsung Dual SIM Always ON, a unique feature that lets users customise their separate mobile worlds. With Dual SIM Always ON, users can receive calls on one SIM while chatting on another. Best of all, the intuitive interface of the Galaxy S5 DUOS LTE ensures that even the least tech savvy consumer

can perfectly navigate their SIM options with the SIM Manager. An easy-to-use platform, the SIM Manager lets users choose their preferred SIM for voice calls, video calls and data. Carrying the best in camera functionality, the Galaxy S5 DUOS LTE comes equipped with a 16 megapixel camera, advanced High Dynamic Range (HDR), and the world’s fastest autofocus to capture natural light and color in every shot. The Galaxy S5 DUOS LTE also features an intuitive interface to power the best shots, the easiest editing on-the-go, and the fastest sharing across platforms. The latest S Health provides a comprehensive fitness tracker that helps users monitor and manage their behavior, and comes with added tools, such a pedometer, diet and exercise records and a built-in heart rate monitor. For multi-taskers and consumers with a need for speed, the Galaxy S5 DUOS LTE will never disappoint. Armed with a quadcore processor and a 2800mAh battery, the Galaxy S5 DUOS is built for high performance. It also amps up speeds with the Download Booster, Samsung’s innovative WiFi technology that bonds Wi-Fi and LTE for even faster data speeds. Chicly designed, the Galaxy S DUOS LTE comes in a spectrum of vivid colors, including Charcoal Black, Shimmery White, Electric Blue and Copper Gold, catching the mood and sating the taste of every consumer. The Samsung Galaxy S5 DUOS LTE will be available across leading retail outlets in UAE for AED 2,599.

August - September '14

Intelligent SME

Rare & Fabulous

Real Madrid Café debuts in Dubai O

ne of the planet’s most famous football clubs, Real Madrid F.C. fans now have an official point of catchup for match days or fine dining. The recently inaugurated Real Madrid Café at The Beach Mall in JBR is a one-of-a-kind outlet not just in the region, but, across the world. The two-level dining destination, which can accommodate up to 375 guests, recreates the myth and magic of one of the world’s most exciting and beloved football clubs. Real Madrid Café, part of the Real Madrid World, offers a vibrant mix of dining, entertainment and retail experience for football lovers, especially passionate fans of the Spanish club. There is no denying the fame and popularity of the Los Blancos, especially after recent triumph enroute their 10th UEFA Champions League trophy in May. The Spanish giants have a massive fan following in Dubai, and neighbouring emirates alike, that is sure going to contribute to the success of the Real Madrid Café. It could, also, be a major tourist hotspot for the millions of tourists visiting Dubai especially those from the region. The club-themed outlet is primarily a restaurant, offering top-notch cuisine. Obviously, Spanish cuisine is at the top of the menu with popular preparations such as gazpacho, omelets, tapas and paella. Along with a wide selection of international specialties, as well as beverages and snacks. Real Madrid Café, part of the Real Madrid World, offers a vibrant mix of dining, entertainment and retail experience for football lovers. A meal for two will set you back in the range of AED 200-250. There are a wide range of coolers and milkshakes along with entrées. Apart from the fine dining experience and the breathtaking view of the multi-storied eatery, fans and customers have the privilege to shop their favourite kits and other official Real Madrid Merchandise.

August - September '14

Intelligent SME

Business Announcements

Emirates NBD ranked global leader in arranging US dollar sukuk

mirates NBD, the leading banking group in the region, announced that its investment bank is ranked as the leading arranger of US dollar denominated sukuk globally, according to a daily newspaper report. As per the league tables published by Bloomberg, from January 2014 to June 2014, Emirates NBD Investment Bank arranged 10 dollar sukuk issuances aggregating to $5.4 billion, which is the highest number of dollar

denominated sukuk issuances led by any arranger during this period. “Emirates NBD Investment Bank becoming a leading arranger of US dollar sukuks worldwide is a milestone achievement, which will take Dubai one step closer to its vision of becoming the world capital of the Islamic economy. Emirates NBD is proud to have made this small contribution towards accomplishment of this vision,” stated Shaikh Ahmad Bin Saeed Al Maktoum, Chairman of Emirates NBD. Widely recognised as the region’s leading investment banking house, Emirates NBD’s investment banking franchise offers a diversified range of products and solutions for clients from across the globe

“We believe this achievement confirms Dubai’s potential to further establish its standing as a global hub for Islamic finance, and underpins its capabilities in offering superior Islamic finance solutions. This achievement also reflects the bank’s focus in not only promoting Dubai’s status as a leading financial hub, but also aligning with Dubai’s Islamic hub strategy,” said Shayne Nelson, Group CEO, Emirates NBD. This achievement is the latest in a series of prestigious recognitions for Emirates NBD Investment Bank, which has also recently been named the, “Best Regional Bank of the Year” by IFR Middle East (Thomson Reuters) and “Best Debt House” by EMEA Finance.

Damac buys USD513m plot from Dubailand

uxury property developer Damac is acquiring a half billion dollar plot of land from Dubailand, according to a Gulf news report. The 55,000,000 square foot land in Dubai would be bought through subsidiary Front Line Investment Co for $513 million, the developer announced earlier this week.

It is learnt that the acquisition will be financed from the proceeds of a $650 million sukuk Damac sold in the second quarter. Damac said in the statement, “the acquisition is in line with the company’s long-term strategy of replenishing its land bank with land in prime Dubai locations to ensure a consistent pipeline of future sales inventory.”

Earlier, Damac announced it is offering to convert Damac Real Estate Development Limited (DRED) London-listed Global Depository Receipts (GDRs) for shares that would be listed on the Dubai Financial Market (DFM). Damac, with a market capitalisation of about $3.5 billion, is expected to list up to 15 per cent of the company on Dubai’s main bourse.

Citymax Hotels set to expand footprint

AE-based hotel group Citymax Hotels announced plans for three new projects to add 700 rooms in the UAE. The three hotels planned will be located in Al Barsha and Business Bay, Dubai and Ras Al Khaimah. “With mid-market hotel development high on the agenda for both government and private sectors in the UAE, Citymax Hotels is currently expanding its successful business model within the UAE and boosting its plans to reach out into the GCC over the next few years,” said Russel Sharpe, COO at Citymax Hotels. The first hotel scheduled for completion will be an additional tower at Citymax Hotels Al Barsha, predicted to be in service by 2016, followed by RAK later in the year. In addition, the Business Bay is projected to be ready by 2017. “Our outstanding comfort, service and facilities are those of a four-star hotel yet at affordable prices with extraordinary value for money. Citymax Hotels are designed to trim the costly frills and redirect savings to guests without sacrificing comfort, design and functionality,” added Sharpe, further elaborating, “the budget hotel category will be one of the most fiercely competed categories in the region in the coming years.”

August - September '14

Intelligent SME

Business Announcements

Jabbar Internet Group invests in Designer-24

abbar Internet Group, one of the region’s most prominent online investors, has announced its investment in Designer-24, the recently launched fashion e-commerce site revolutionizing fashion in the Middle East. The concept behind Designer-24 is to economize luxury fashion, offering the latest runway trends for rental at a fraction of the retail price. Understanding the region’s love for luxury fashion and the heavy events calendar of the Middle East, the creation of Designer-24 seemed like a

natural move for co-founders, Sara Alemzadeh and Ranya Khalil. “We saw space for a completely new fashion concept in the Middle East. Online retail is becoming a huge economic driver in the region. The premise of Designer-24 is to offer a seamless experience that makes life easier for women,” said Alemzadeh, Co-Founder and CEO.Designer-24 offers new season designer dresses for rent to suit any occasion, from cocktail to black-tie with VIP customer service including pick-up and drop-off straight to and from your door. To ensure an unflawed experience,

Designer-24 provides a back-up size for free and takes care of the dry cleaning. “With Dubai’s love affair with luxury, it seemed like such a natural fit to launch Designer-24 here. We offer a stress-free service that allows women to experiment with new season trends while getting to know designers in an economical and convenient way,” said Khalil, Co-Founder and CEO. Jabbar Internet Group, Designer24’s primary investor, is renowned for identifying and investing in strong e-commerce startups including the hugely successful Souq.com. As the founders of Maktoob.com, Samih Toukan and Hussam Khoury of Jabbar Internet Group understand what it takes to succeed in this market. “We see enormous growth potential for Designer-24. The business model is quite unique to the region and we are looking forward to seeing how it will disrupt the digital fashion marketplace in the Middle East. While operations are currently only in the UAE, expansion to the wider GCC seems like a natural progression for the concept as women throughout the region are already responding positively to the rental business model,” said Samih Toukan, Chairman of Jabber Internet Group.

GCC evaluates free movement for expat jobseekers

ulf hydrocarbon producers are considering allowing their large expatriate community to move freely and work in any member state, a UAE-based newspaper said on Wednesday. Labour ministers in the six-nation Gulf Cooperation Council (GCC), which controls over a third of the world's proven oil deposits, have almost completed a study on such plans and are due to meet before the end of this year to discuss it, the Saudi Arabic language daily Aleqtisadiah said, quoting GCC officials.

The plans benefit both the nationals and the foreigners residing in the GCC but some members fear allowing expatriates to move and work freely in any member state would hit their plans to find jobs for their citizens, the report said. "The ministers are still studying the proposal to allow citizens and expatriates to freely move, reside and work in any member country," Kuwait's social affairs and labour minister Hind Al Subaih told the paper. It quoted Fowzi al Majdali, Kuwaiti labour undersecretary,

as saying that granting such facilities to the expatriates could "obstruct job nationalization programmes in the GCC." "GCC countries should conduct more studies on this proposal before it is approved...they should evaluate the advantages and disadvantages," he said. More than 20 million expatriates, mostly Asians, live in the GCC states--the UAE, Saudi Arabia, Kuwait, Qatar, Bahrain and Oman. They account for over 40 per cent of the group's total population of about 48 million.

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Intelligent SME

Get Informed

Separating the zeroes from heroes “If you want to be successful in life, find a way to serve others,” advised America’s hippest motivational coach, Jairek Robbins, at his debut seminar held in Dubai recently. With consistent, massive action, some fine tuning and being 100% committed to the vision, you can achieve any dream,” said Jairek on an inspiring note. “The only thing worse than being blind is having sight but no vision,” he said quoting Helen Keller. “Lack of innovation causes everything to age, whether it is a person or a business and therefore it is absolutely essential to innovate with time,” said Jairek adding that one has to be on an eternal quest to learn something new from every experience and every person he/ she comes across. At the age of 23, Jairek was awarded the Congressional Award Gold Medal from the United States Congress. By 25, he became an

lobally celebrated motivational coach, Jairek Robbins, made a debut in Dubai recently with an interesting seminar organized by RightSelection on how one can achieve rapid results in their personal and professional lives. Often regarded as America’s hippest speaker, the 28-year-old called upon people to assess their current position in life and create a clear vision of where they want to be. “Draw up a clear plan of daily actions that can be applied to close the gap from where you are to where you want to be.

international phenomenon when he developed a revolutionary approach to accelerate results for businesses in different industries. “Enjoy your work instead of enduring it; there’s nothing more fulfilling than falling in love with your hard work,” said Jairek. He however rued that the youngsters today have forgotten what it is like to respect and appreciate hard work. “Most of these kids have had their parents struggled for them. As such they do not know the value of hard work, in fact they think and act as if the world owes something to them. The two major lessons youngsters need to learn is take pride in what they do and love the hard work they put in,” explained Jairek.

August - September '14

Intelligent SME

Success Story

An affordable housing 'dream' comes true

Dubai has always been the first choice for people across the world scouting a better job, business market or just warmer weather. But these days, domestic migrants are increasingly driven by the quest for cheaper housing. Post the 2008 financial crisis, the expat workforce moved long distances, citing affordable housing as their primary motivation for doing so. With a positive turnaround in the economy, and the purchasing power returning to the middle-low income community, the demand for real-estate as an investment bet has jumped in Dubai. The shift has, definitely, produced some new winners, and the ‘Dreamz’ project by Danube is one of them.

ll of the 171 townhouses within the project were sold out at the campaign held at the Oberoi Dubai Hotel. The meet saw more than 1,000 registered buyers and investors queue up to lay their hands on the ‘prized possessions’ – townhouses that were offered on first-comefirst-serve basis. “This is a great moment not only for Danube Properties, but also for the entire real estate fraternity of the UAE and reflects strong investor and end-user confidence,” said Rizwan Sajan, chairman of Danube Group and Danube Properties. He added, “This is also a testimony that if you have the right product, right location, right pricing and the right developer brand behind the project, one wouldn’t face shortage of buyers.”

Following is the edited transcript of the interview:

ISME: What was the wisdom/ thought process in starting-up Dreamz?

RS: The idea of entering Dubai’s real estate

market was always a possibility, but we wanted to take time to completely justify our focus on this vertical integration. Post a thorough research and understanding of the market, the company took the decision of ceasing the best opportunity, and Dreamz came into being. In addition, Danube Group has established a good reputation and track record as a building materials company, earning accolades for product quality and commitment over the last 20 years. Taking

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Intelligent SME

Success Story

forward the trust and legacy built among investors, Danube has entered the real estate segment for raising the benchmark and providing the buyers a variety of options at an affordable rate.

ISME: Affordable housing projects

are said to have low return on capital. Do you think this project is a worthwhile investment?

RS: It is true that affordable

housing doesnâ&#x20AC;&#x2122;t yield much returns/profits as compared to developing luxury properties for high-end investors. However, with the rising demand for lowcost housing facilities in Dubai, and the heavy influx of migrant workforce, we believe that investment in affordable projects will only increase day-by-day. Besides providing a lucrative rental income, we strongly believe that these houses will serve as good investment bets too. Affordable housing schemes will be the order of the day. And thus, we would prefer building townhouses or low-cost apartments as opposed to luxury villas.

housing as they believe people will buy high-end homes?

With the rising demand for low-cost housing facilities in Dubai, and the heavy influx of migrant workforce, we believe that investment in affordable projects will only increase day-by-day.

RS: Danube Propertiesâ&#x20AC;&#x2122; investment comes at a time when Dubaiâ&#x20AC;&#x2122;s real estate market is galloping with its growth and the atmosphere is conducive for builders to pool in their money. The dark days of the financial crisis (2008) are now over and the property market has bounced back too, soaring 35 per cent residential property prices and demand has risen approximately 30 per cent as compared to last year, according to an independent estimate. The economic conditions are favourable for real estate developers, irrespective of whether

ISME: How do you look at the timing of the launch given that the economy is on the mend and developers tend to shift their priorities towards premium

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Intelligent SME

Success Story

they belong to the luxury and premium housing clan, or low cost housing schemes. Each property developer has his target client/ customer base. Hence, given the current market scenario, it would be unjust to remark that only premium properties will prove successful for builders. It is simple: the well-established section (investors) in Dubai, with enough capital at their disposal, will opt for luxury housing, whereas; the middle and lower-income segments and the expat workforce will pick up low-cost housing.

ISME: Will you look at replicating the projects in other emirates too?

RS: Yes, if given an opportunity

and a favourable location, I would most certainly like to bring up projects in other emirates too. Currently, we are on a lookout for another location for our second project.

ISME Not many developers have got 24

Yes, if given an opportunity and a favourable location, I would most certainly like to bring up projects in other emirates, too. Currently, we are on a lookout for another location for our second project.

into affordable housing space, how does Danube plan to but scale up in a big way with this project?

RS: Earlier property developers

were chasing the luxury housing space, targeting high-net investors in Dubai. However, as the countryâ&#x20AC;&#x2122;s economy has picked up, with the expat community gaining purchase capability, affordable housing projects have become the order of the day. The three- and fourbedroom townhouses in our project range between Dhs2.5 million to 3.45 million. This is our first project and the sell-out of all of the 171 townhouses reflect the investor confidence in Danube Properties as well as the real estate market in Dubai. This end-user and investor endorsement will encourage us to carry out our construction works and deliver the project timely to our valued customers by 2016 and also launch more such projects in the coming years.

August - September '14

Intelligent SME

From the Entrepreneur

The pioneer kidâ&#x20AC;&#x2122;s apparel reseller Sarah Appleton, founder and CEO, Mini Exchange.com has seen her business grow leaps and bounds in a matter of months. Backed by an innovative business concept, Mini Exchange is a one-stop reseller for kids and toddlers apparel. Nikhil Pereira caught up with the former financial consultant.

August - September '14

Intelligent SME http://www.miniexchange.com

-Commerce is an ever mushrooming business concept, but only few products and services have achieved stupendous growth using this avenue. Sarah Appleton, founder and CEO of Mini Exchange, identified a gap in the online shopping space for toddlers. She conceptualised an online business that went beyond the ideal scenario for parents to go online and buy branded children ware. In fact, it’s an online platform for parents to sell their unwanted and surplus branded kids wear. Explaining the theory behind starting Mini Exchange, Sarah points out, “kids outgrow their clothes and accessories rather quickly. Toddlers Dubai have access to the high end branded clothes, which includes Burberry and Prada. However, these clothes are of little use when kids out grow them.” While in the west, outlet malls and bargain centers are a good place to unload surplus clothes, there is just the one Outlet Mall in Dubai, with options few and far across the emirates. The latter, meanwhile, doesn’t offer the option of re-selling either. Hence, Mini Exchange stepped in with an innovative concept of putting to use the apparel range, once again. “We provide a platform for parents to sell their kid’s outgrown clothes. All parents have to do is sign up on our website, and enter a description of the item they want to sell. We, then, pick up the items from their door via courier. Post repackaging, it’s listed on Mini Exchange, and the company as well as the seller earn a profit once the product goes off the shelf,” added the British-based entrepreneur. Sarah had several things going in her favour, after she gave up her job as a financial consultant almost a year ago. Mini Exchange had a chic boutique concept, something unfamiliar to the region. Six

We provide a platform for parents to sell their kid’s outgrown clothes. All parents have to do is sign up on our website, and enter a description of the item they want to sell.

months after quitting her plush multinational chair at a top firm, Sarah launched Mini Exchange. But, little did she know, her newlylaunched business was about to receive a shot in the arm. “A couple of months into the venture and we got approached by a multi-national retail brand based here (UAE). They offered all their end-of-line stock to be unloaded through our platform on a discounted price. We jumped to the opportunity and picked up the 300 odd pieces, since we had nothing to lose. Hence, our business model virtually evolved overnight,” exclaimed Sarah with a look of disbelief as to how that one incident catapulted her business. Did she foresee a prospect on the horizon? No. But, she was confident of the business model’s evolution, moving away from being a second hand kid’s wear reseller to a genuine online bargain store for the brand conscious parents.

From the Entrepreneur “The brand outlet sale worked like a charm. This prompted us to take it to the next level and knock on the doors of other big brands. Several of them warmed up to the idea, and, ever since we have signed 27 partnerships with a lot of brands in the Dubai Mall. Not just the big brands, we are also closely working with some of the local brands. Currently, we have as many as 160 brands listed on the site. Starting off with 500 pieces, today we are dealing with as many as 5,000 items of kids clothing, shoes and accessories,” she solicits. Sarah vehemently disagrees that the core of her business, the parents being the sellers, haven’t been forgotten. “We still get around 500 items coming in from parents, which is a crucial arm of Mini Exchange. No, we have not forgotten the human angle to our business. Adding on the brands was a scheme of things to come, it’s just that it came early.” Going ahead, Sarah has no immediate plans to digress from the fabric of the business: kids wear. “We will not diversify into teen and adult clothing items, period. We stand true to our original business concept. However, the aim is to establish Mini Exchange as a one-stop shop for all kids clothing and accessories. It will have a wide array of kids sporting items across different sports and age groups.” Mini Exchange, which started out as an apparel reseller, could someday be selling roller blades and bicycle helmets for kids. “Shortly, we will be going in for our first round of crowd funding. We are hoping to raise significant amounts of income that would arm us with an aggressive marketing strategy. We will deploy a strategic social media campaign, and the finances will fuel the physical growth of the company,” concludes Ms. Appleton.

August - September '14

Intelligent SME

From the Entrepreneur

Bringing the lavish, luxury side of e-commerce As UAEâ&#x20AC;&#x2122;s malls try harder than ever to outdo the amenities that their competitors offer, the retail e-commerce sector is taking its own sweet time to pick up as compared to other emerging markets. However, the country boasts of highest mobile and smart phone penetrations figures in the world, and studies reveal that a majority of youth population use the Internet for their product research and price comparison before making a purchase. The process, inevitably, will drive transactions online, and, thus, grab the market share from traditional retailers. UAE isnâ&#x20AC;&#x2122;t quite the China for e-commerce group, but it is still too promising to ignore. Exploring the business strategy and growth potential of premier e-shopping destination, MOX iT.com, ISME spoke to the online ventureâ&#x20AC;&#x2122;s chief executive officer, Debbie Baertschi.

Following is the edited excerpt of the interview. 28

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Intelligent SME

From the Entrepreneur ISME: Could you share the business strategy of MOX iT, and how it plans to maximise penetration in online market share?

DB: MOXiT’s business model

is to create the Middle East’s premier e-shopping destination that delivers an alluring and sophisticated online consumer experience. It offers the shopper signature deals on some of the world’s top brands, and creates an unsurpassed smart buying journey with elements like a completely intuitive site layout, authentic offerings from some of the world’s most recognisable brands, and express delivery for most purchases. The idea is to invite the community (consumers) to fabulous experiences across the adventure, food, travel, wellness and fashion sectors.

ISME: According to you, what are the strengths of MOX iT as against online shopping websites present in the UAE?

DB: We came into the market wanting to set new standards for consumer trust, brand visibility, transparency, smart shopping and express delivery! And thus far, we’ve successfully accomplished our goal, which sets us apart from other offerings. All too often, a less than ideal shopping journey makes consumers lose faith or get frustrated, leading to cart abandonment. We make sure that the shopping journey is absolutely transparent and completely intuitive to set new benchmarks for ease of navigation and the entire experience. And of course, visitor engagement is key in an ecommerce marketplace. In this case too, our venture is also head and shoulders above the norm: an average visitor spends 3 minutes and 16 seconds on the site, browsing through an average of four pages. MOXiT has invested in driving traffic to its site, and increasing reach. That differentiates us from sites that don’t get heavy ‘footfall’. Our online traffic has increased from 10,000 to 50,000 per month while its database has seen an increase from 10,000 to 1.6 M.

Another key competitive advantage is the amount of thought we give to the offerings on the site. The team carefully handpicks premium brands, the electronics and great adventure experiences. We’ve tailored the entire product mix to the aspirations of our switched-on target audience, as opposed to stuffing the site with volume, and that has paid dividends in consumer loyalty and engagement. And finally, we realise that the shopping experience doesn’t end at checkout. We work ceaselessly to ensure consumers get an ideal overall journey, from opening their browser to when their purchase arrives at their door via express shipping. We only partner with reputable shipping companies, and offer above-board shipment and return policies. There are still concerns in the general e-commerce offerings in the Middle East. But we believe our venture is setting a new benchmark in transparency, trust and fast delivery that will force competitors to raise their game too.

ISME: You claim to offer a complete smart buying experience as opposed to a one-off transaction. What does this experience entail?

DB: MOXiT has an entire team dedicated to streamlining the customer experience. And by that we mean looking at how customers interact with the site, what they want to see and how they want the information displayed. We put tremendous effort into optimising the shopping journey and looking at the way consumers transit through the site. There are continual improvements being made to the transparency and ease of shopping along with a research on the ideal mix of products for the best results. The idea is to create a highly intuitive shopping journey with complete transparency. The results of this continuous improvement methodology speak for themselves. The bounce rate has reduced from 86% to 56% in the last 11 months. Similarly, we have seen a decrease in the Cart Abandonment rate from 95% to 70% - a sign that consumers

are carrying through with their purchases due to alluring offers and greater trust.

ISME: For instance, a consumer would prefer buying shoes from a store rather than e-shopping as it provides him the choice of trying out the fit and style to suit his comfort levels. How does an online retail website tackle this ever-persistent notion? DB: Consumers are becoming

more adept at shopping on the high street, and, therefore, have a good idea of what shoe size fits them. Our selected shoe styles are chosen after scouring the fashion scene to bring you the latest trends at irresistible prices. And let’s not forget, our shoe store is highly exclusive in the region as customers can shop according to their size. We stand behind everything shown on the website, with attention to style, quality and fit. Today, many customers get their personalised fashion fix from us, with access to top trends, style inspiration and world class service. By shopping online rather than browsing the stores, we are in-fact making the experience more convenient, saving our customer’s precious time and costs by bringing the vast variety only a click away. And not to forget, our easy returns policies gives consumers the confidence to purchase a size to try, safe in the knowledge that it can be exchanged should it not be the right size.

ISME: What are the pros and cons of online retail industry?

DB: The biggest driver of e-commerce is availability and convenience. Customers get to compare deals. It’s easy to find the best prices, and the right specifications for whatever you require. There’s wider choice because the entire world is open to you. The local mall, no matter how big, will only ever have a selection of stores. Online shopping also lets customers take advantage of superb deals right away. And customers can shop 24/7, without having to think of opening and closing times. And they don’t need 29

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Intelligent SME

From the Entrepreneur to spend time walking around in a mall. There’s also no need to wait in a queue. And with the vast numbers of product reviews available, customers can do the research, look up comparisons, and snap up a great deal – whenever they want. There are some possible cons as well, but these can sidestepped by only using transparent and trustworthy e-commerce sites. Customers need to be sure their seller only stocks authentic products. Some sites charge customers for shipping, which can add to the cost. Online shopping is a bit difficult for large products. Damages or defects in the shipping process can also be a concern, which is why online retailers should ideally only work with well known shipping companies. Before buying, customers should examine their seller’s return and shipment policies. They should also make sure the merchant is trustworthy so as to prevent credit card fraud or the risk of bogus websites.

ISME: A recent report states

that UAE is becoming a hub for online retail. What is your opinion on the same?

DB: The UAE market is highly receptive to e-commerce. Surveys have indicated that up to 60 percent of consumers are looking to purchase online within a short time span. We know our shoppers well and have tailored the shopping experience to their preferences. Our online shop allows us to be available 24/7 to save on expensive retail spaces and costs. It benefits our customers to save on all their favourite genuine brands by enjoying prices that are up to 70 per cent less than standard retail. E-commerce is growing across the region, and is expected to be the future of the retail industry in the Middle East. Consider that e-commerce sales in the Middle East and Africa alone are expected to reach USD 51.4 Billion by 2017. Internet users in the Arab World are estimated to reach over 170 Billion by 2016, making it a highly promising online market. 30

Internet users in the Arab World are estimated to reach over 170 Billion by 2016, making it a highly promising online market.

ISME: How would you define today’s online shoppers? Which categories are most popular with the online shoppers?

DB: We cater to a lifestyleconscious audience that wants a hassle-free shopping experience to go with authentic offerings, from some of the world’s most recognisable brands. Our customers appreciate a smarter

online shopping experience, and desire a sophisticated and alluring shopping destination. As a whole, we find that the online shopper demographic is becoming wider and more varied. It’s not just young tech-savvy men, as was the case a decade ago. The percentage of female shoppers has grown tremendously and the age bracket has also widened. Consumers are beginning to realise that established online e-commerce brands have as much to lose in terms of reputation as their physical counterparts if transactions don’t go well. There is definitely an upturn in consumers shopping regularly online from destinations they are comfortable with, and have had good past experiences with. For us, fashion accessories – designer handbags, sunglasses and shoes - lead the way in terms of sales volumes, with electronics a very close second. We also get a lot of traffic on our high-end beauty treatment, adventure and getaway packages because of the very selective choice of destinations and services offered.

ISME: Several online shopping

websites are developing apps so that they are instantly accessible to shoppers on the go. How do you look at this trend? Is MOX iT planning to go the similar way as well?

DB: At MOXiT, we’re concerned about the shopping experience in its entirety, from A to Z. We’re only going to move to mobile if we feel we can generate the same authentic MOXiT consumer experience. Mobile apps are almost a trend nowadays- everyone’s jumping on the bandwagon. But in our experience, a lot of those apps are rushed through and offer a less than intuitive user journey. And there’s not much discussion on how many carts are actually checked out through apps, and whether consumers might prefer to wait until they get to a desktop version of the site. We’re considering whether an app is the right direction for us to take, and therefore we remain deeply committed to perfecting the shopping experience on the MOXiT site first.

August - September '14

Intelligent SME

Insurance

Get equipped, get insured David Heard, Head of Regional Liability sheds some light on AXA’s Gulf Office Secure and Business Secure policies

lobally, a wide expansion has been witnessed in consumer protection, health, safety and employee protection legislation in recent years. Let’s consider law no (24) 2006 that was passed to safeguard consumer rights and interests in the UAE. This has led to an ever-increasing need for liability insurance for all businesses, particularly SMEs where the impact of a single large claim could be devastating to the business. In addition, with an increase in exported products and services, exposure to foreign legislation, easier and cheaper access to legal redress, and higher levels of litigation (especially in EU/USA/ Australia and some parts of Asia) mean a global defense capability should be expected from your liability insurance. There is scant need in buying liability insurance from a local insurer, which is not even represented outside the UAE where your prime area of operations would lie. We believe our customers deserve an insurer that is able to defend a claim not only in the GCC countries but world over. In addition, AXA Gulf offers a global network that is able to legally cover SME’s exports and operations abroad, along with a range of liability insurances that cover most eventualities. A detailed 5-point plan listed below sheds some light on AXA’s Gulf Office Secure and Business Secure policies:

Public liability:

Liability covering personal injury or property damage to third parties (i.e. not employees). This product should be considered by organisations that have

visitors on their premises or have neighboring property. Also, those companies that involve personnel working away from their premises or holding dangerous goods or materials capable of causing a pollution event. Several free zones, public or third party sectors will have liability insurance as compulsory. Workers’ compensation and employers’ liability is offered to indemnify for any claims brought against an employer following an injury to any employee as provided for under UAE Labor Law. Product liability is designed to protect anyone manufacturing and selling products in the UAE or abroad who could be subject to claims for products sold causing injury or damage. The right of a consumer to claim can originate either from UAE consumer law, which affirms the consumer’s “right to be safe and be protected against products that are hazardous to health and safety”. The law specifically refers to the consumer’s right to be compensated. If exporting goods, exposure to product liability claims will be subject to consumer protection legislation which is

elaborately developed and in EU, Australia and USA, amongst others, financial assistance is given to a complainant via legal aid and lawyers may be able to take a case on a ‘no win no fee basis’, increasing the likelihood of a claim.

Professional Indemnity:

Any business offering paid professional advice has a very high duty of care and an exposure to claims from customers for financial loss caused by an error. AXA’s Professional Indemnity policy helps defend, and pay on behalf of firms offering professional advice in the event of such an error.

Management Liability:

That includes Directors and Officers liability is designed to protect any company exposed to liability to pay claims from investors, shareholders, regulators or employees in accordance with the UAE commercial companies’ law. AXA Gulf offers a full range of products which can be designed to protect against the specific requirements of a free zone lease contract through to the full range of liability cover.

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COVERSTORY

The lords of finance

A growing proportion of financial institutions, banks, and specialised business solutions have camped up to empower SMEs in the region. And, who are they? ISME brings you a detailed report.

August - September '14

Intelligent SME

Banking and Finance

'Compromised quality can hinder progress' UAE Exchange, with its ever-increasing global footprint and trusted brand value, has emerged as a dominant money transfer player, serving both businesses and consumers with easy ways to quickly send/ receive payments virtually anywhere around the world. Catering to the millions of migrants and underbanked population in rich countries, it helps them send money to their families across developing countries on a regular basis. Unlike bank fund transfers that can take two days or more for a recipient to get cash, UAE Exchange is somewhat different, as it enables instant transfers in cash through its worldwide footprint. 34

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Intelligent SME

Banking and Finance

n the simplest of terms, its stated strategy is to be the preferred financial services provider for the under-served across the globe. And thus, it not only focuses on new offerings for their existing customer base, but also targets consumers spread across 32 countries with unmet financial service needs as well as all the under-served businesses needing cross-border payment capability in an increasingly connected global economy. Promoth Manghat, vice president – global operations at the UAE Exchange, in an interview with the Intelligent SME, credited the company’s success to such customers. “We have been in the business for 33 years now. This long and successful journey wouldn’t have been possible without the support and trust of our customers, which can be gained only by delivering quality. When quality is the only criterion, then competition shouldn’t be a concern,” he said. Emphasising on the growing competition in money movers industry, Manghat added that competition is healthy and generally proves to be advantageous to customers. “So, if we maintain innovativeness, consistency in quality of products offered and be uncompromised in customer care, no competition is ever a worry.”

a violent anti-social activity. While one is termed ‘money laundering’, the other is known as ‘terrorist financing’. In both these acts, it is the financial system that gets affected adversely. In addition, the increasing number of financial frauds conducted in the online space also have a strong negative impact on the economy. Thus, it is our duty to keep a check on any such attempt as a responsible money transferring entity. We are constantly on the vigil, looking out for any suspicious transaction passing through our counters and also through our online money transfer portal. Every single day of the year, we are on our toes keeping a sharp eye, because the aforementioned acts are our biggest concerns across our 32-country operations. We have strong Anti-Money Laundering (AML) and Counter Terrorism Financing (CTF) policies in place, both at the global level and also in each of the markets, where we operate. Our Know Your Customer (KYC) and due diligence processes are strictly followed as per the international standards. Each of our team members, across the organisation, is trained to understand our AML – CTF policy thoroughly. Frequent training sessions are conducted to keep the team updated on the latest and the best practices.

ISME: With more than 130 exchange houses, operating over 750 outlets across the country, offering not only simple ‘dirham-to-other-currency’ swaps but also bill payment, payroll services, remittances, and more--how do you tackle competition in such a crowded space?

PM: UAE Exchange’s 33 yearlong and successful journey wouldn’t have been possible without the support and trust of our customers, which can be gained only by delivering quality. When quality is the only criterion, then competition shouldn’t be a concern. Also we offer a wide range of financial services at our branches. We are constantly on the lookout for expanding this repertoire to the convenience of our customers. Towards this, we understand customers’ requirements and proactively conceptualise innovative solutions, which have become trendsetters. Better ideas and first mover advantage keeps UAE Exchange in the lead. Competition is healthy and generally proves to be advantageous to customers. So, if we maintain innovativeness, consistency in quality of products offered and be uncompromised in customer care, no competition is ever a worry. ISME: Recently, the Central

Bank set higher paid-up capital

Following are the edited excerpts of the interview:

ISME: What is your biggest

security concern when it comes to transferring billions of dirhams across 32 countries, spread out in five continents, on a daily basis?

PM: Money transfer gets extremely sensitive on security concerns, and industry players need to be conscious about this fact. While millions of expatriates use formal remittance channels, like UAE Exchange, for sending money to their home countries, ensuring a good life to their respective families, there are many groups of people, who are constantly trying to clean their money earned through illegal means, or to fund 35

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Banking and Finance

They can also join hands with us for corporate cash collection, agent cash collection, bill / subscription / premium amount collection etc. requirements for currency exchange houses in the UAE. How is this move likely to benefit customer security, or, the exchanges in the long run?

PM: When an organisation commits increased capital in the business, it reiterates the financial stability of the company. With this criterion met, not only does the exchange house comply with the regulatory expectations, but it also bolsters the trust of its customers and partners. In the long run, it strengthens the brandâ&#x20AC;&#x2122;s goodwill among all stakeholders, contributing to the well-being of the business. ISME: UAE Exchange has had a

great success, what advice you would give to a younger company on the basis of your rich experience in the industry?

PM: With 6.5 million happy

customers, 700 branches across 32 countries, 150 correspondent banks, accounting for six per cent of the total global remittances and 33 years in the business, yes, we can consider UAE Exchange as a successful venture today. We have made it purely on our strong values, pro-active thinking, thorough understanding of customer requirements, customer-

centric approach and unmatched customer service. The only advice for younger entities is to keep an uncompromised approach for quality in whatever they do and be patient and persistent.

ISME: Employing more than 9,000

people, how much importance does job creation, or promoting job creation play in your business model?

PM: At UAE Exchange, we have

over 9000 people representing more than 40 nationalities. This diversity enables us to attend to customers from any nationality with utmost ease. People are our real assets and we ensure that more opportunities are created to strengthen the team with hand-picked professionals. We are also an active participant in the Emiratisation initiative, contributing to the vision of the government of the UAE to offer UAE nationals with opportunities to explore their talent and grow in the corporate sphere.

ISME: Do you have any special

facilities for the SMEs based in UAE? If yes, please elaborate.

PM: We offer remittance, currency exchange and bill payment services to individuals and corporate entities including SMEs. We take care of corporate payments across the borders, where organisations can make payments to partners and associates anywhere in the world through us. They can also exchange any currency of their choice at our branches in bulk at competitive rates. We offer customised Forex services to companies with special requirements. Companies can partner with us for salary disbursal requirements of their employees. They can also join hands with us for corporate cash collection, agent cash collection, bill / subscription / premium amount collection etc. ISME: Ethics and integrity are at the

core of sustainable long-term success. What are your unique company values?

PM: Ethics and integrity are of utmost importance for any business to sustain and succeed, especially if one is in the financial

realm. Integrity, commitment, empowerment and care are the four strong values that drive our everyday business. We adopt an uncompromised approach to adhere to our values and get inspired to deliver our best, every time, thus working towards achieving our vision of being â&#x20AC;&#x2DC;the most admired global brand in money transfer, foreign exchange and payment solutions.â&#x20AC;&#x2122;

ISME: What would UAE Exchange characterise as their proud achievements so far?

PM: UAE Exchange could earn the trust of over 6.5 million customers, 150 correspondent banks and various other technological and strategic partners, worldwide. In 33 years, we could build the largest global network among remittance brands with over 700 branches in 32 countries. We could earn and sustain the trust of regulatory authorities across all the markets. We could build a strong team of over 9000 employees representing over 40 nationalities. Our penchant for quality earned us membership in SWIFT and MasterCard along with various recognitions from ISO, TICSI, Superbrands and more. These milestones have humbled us further and inspired us to push our horizons without compromising on quality. ISME: Lastly, according to you, what characteristics differentiate UAE Exchange from others? Simply put, why should an individual or an SME choose you as compared to banks or other exchanges?

PM: We give utmost importance to customer experience. Towards this, we ensure that no compromise is entertained at any step. For this very reason, we are sure that everyone, individual or SME, will get the best customer experience at our branches, be it in terms of the exchange rates, services charges, customer care, promotions with their prizes, technological innovations, partnerships or the secure processes, which we follow. Moreover, the trust we enjoy from our partners and regulators also ensures that every customer has a memorable experience with us, every time.

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August - September '14

Intelligent SME

Banking and Finance

Seamless SME financing solutions, still a challenge? Lack of SME credit rating agencies to assess risk, lack of an asset / collateral that can be used for SME financing transactions, lack of sophisticated risk management systems, and need for development of a strong and transparent financial infrastructure are a few challenges faced by lenders, writes Sheetal Kothari.

he Middle East and North Africa (MENA) predominantly possesses micro, small, and medium enterprises (MSME) funding gap of about USD 180 Billion, with small and medium enterprises (SME) contributing to less than 8 per cent of total loans by banks. This is extremely low in comparison to an average of 20 per cent in developing countries and over 25 per cent in developed ones. The region is home to approximately 19-23 million MSMEs, contributing to over 80 per cent of the total business, 63 per cent of which do not have access to finance. SME financing is generally profitable due to high interest rates attributed to such products, but it also has high risks. The revenue pool of SME in the region is estimated to be around USD 6 Billion and is expected to grow annually at 18 per cent to reach USD 15 Billion or more by 2020, thus creating huge growth opportunities for the SME financing market.

The challenges

Obstacles or challenges to SME financing arise from both the lenderâ&#x20AC;&#x2122;s and borrowerâ&#x20AC;&#x2122;s perspectives. Lack of SME credit rating agencies to assess risk, lack of an asset / collateral that can be used for SME financing transactions, lack of sophisticated risk management systems, and need for development of a strong and transparent financial

SME financing is generally profitable due to high interest rates attributed to such products, but it also has high risks. The revenue pool of SME in the region is estimated to be around USD 6 Billion and is expected to grow annually at 18 per cent to reach USD 15 Billion or more by 2020, thus creating huge growth opportunities for the SME financing market.

infrastructure are a few challenges faced by lenders in the MENA. In addition, MENA banks are more averse to risks than their global peers and, hence, may be more cautious to finance SME that are more risky than large corporates. The large financing gap is also due to lack of government support or schemes that promote SME lending and limited capacity of existing institutions that can tap the potential of this huge underserved market opportunity. In addition, most MENA banks do not have a separate division dedicated to SME financing, which will enable them to assess associated risks on a portfolio basis instead of a case-by-case basis. Moreover, there is reluctance from borrowers to approach financing institutions due to religious reasons. As much as 40 per cent of MSME refuse microloans due to religious reasons. This indicates need for Islamic financing products that better suit the requirements of such borrowers.

Funding options

Banks: Despite many challenges, bankers are aware of the opportunity that lies in catering to the MSME segment. With government support and better financial infrastructure, banks can be expected to provide much higher credit to MSME borrowers than what they currently do. However, borrowers who have a sound credit history, good record of business

August - September '14

Intelligent SME

Banking and Finance performance, and display potential to grow would be the ones to be able to seek finance from banks at very competitive rates. Microfinance Institutions (MFIs): Only about 10 per cent of microfinance demand in the MENA is met by existing MFIs. While liquidity of capital is not a constraint for these institutions, lack of distribution channels and a proper financial infrastructure, coupled with reluctance from borrowers, pose significant challenges in this segment. Part of these challenges can be addressed by offering Islamic financing products. Even if such products have higher charges than their traditional counterparts do, they are widely embraced by borrowers in the region who want to ensure compliance with their religious

Sheetal Kothari, senior research analyst, Business and Financial Services Practice, Frost & Sullivan.

beliefs while doing business. To address the challenges, the governments need to introduce loan guarantee schemes and other initiatives to encourage lending to the micro segment in the region. Private Equity / Venture Capital (PE-VC): While the above two options provide debt financing, venture capital and private equity firms can play a big role in equity financing for start-ups in the

region. There have been close to USD 15 Million invested by PE-VC firms in the MENA in 2013. Most of these investments have been in the IT and oil and gas sector. However, lack of favourable policies to attract international private equity and lack of superior technological advancements in comparison to developed or other emerging economies may prove to be a challenge for MENA start-ups to increase private equity investments.

Conclusion

Creation of an enabling environment complemented by government support, development of adequate financial infrastructure, and increase in authentic SME credit-rating agencies and policies to attract international equity would provide the necessary platform to bridge the large MSME funding gap in the region.

(SME) contributing to less than 8% of total loans by banks.

1 2 3 4 5

This is extremely low in comparison to an average of 20% in developing countries Over 25% in developed ones. The region is home to approximately 19-23 million MSMEs, contributing to over 80% of the total business 63% of which do not have access to finance. 39

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Intelligent SME

Banking and Finance

RAKBANKâ&#x20AC;&#x2122;s 360-degree formula for success 40

August - September '14

Intelligent SME

Banking and Finance With market foresight and consumer behaviour study forming the basis of their business strategies, RAKBANK has consistently strived to be innovative and creative with not just their many offerings, but also their advertising and marketing campaigns. Banali Malhotra, head of marketing, RAKBANK reveals to ISME the pre-requisites for a successful communication and marketing strategy.

ISME: RAKBANK has always

positioned itself differently as compared to its contemporariesplease throw some light on your marketing strategy for SMEs.

BM: Market foresight and

consumer insights form the core of the RAKBANK’s business strategy. Our recent research has revealed that there was a very high latent demand for SME finance among the emerging and micro SMEs who were looking for high loan amounts, but did not have substantial assets to be used as collateral to secure a business loan. RAKBANK saw this as an opportunity and launched a business loan with ‘Collateral-free’ being its key feature, targeting young and upcoming SMEs. To further boost this segment, we

also offered high loans amounts for business expansion. This was like a breath of fresh air in the market, which eventually became an instant hit. All our campaigns are based on four advertising principles, which are addressed as the four Cs: Crystal-clear, Confident, Cheeky and Combative. Every campaign we have launched has been single-mindedly devised and implemented keeping in mind the ‘Collateral-free business loans’ benefit offered by RAKBANK. With such offerings, we have become the ‘consumer-driven’ bank that offers loans based on consumer requirements.

ISME: Could you outline the

communication tools used by the bank to maintain relations between enterprises and the market, and thus creating value for itself?

BM: RAKBANK has successfully adopted the 360-degree communication strategy that helps in delivering the message to the right audience through highly creative advertising. Before working out a 360-degree strategy, RAKBANK tries to identify the various ‘moments of truth’ when a consumer comes in contact with its brand / product during different time periods and the medium, which the customer will be most receptive to at that point in time to receive the advertising message. RAKBANK effectively uses both ‘above the line’ media vehicles such as press, television, radio, outdoor, e-mailer, social and online marketing as well as ‘below the line’ media such as branch and ATM branding, direct mailers, take-ones, posters, banners, cut-outs, statement inserts, SMS marketing, IVR etc., to promote the business banking products and services to our existing and potential customers. Also all bank staff comprising sales, branches and customer service is completely trained and briefed to answer customer queries in a uniform and informed manner. RAKBANK involves all the wings of its agency - creative, media, PR and direct marketing- to work towards

In my opinion, smart use of SEM (search engine marketing), active presence on social media websites to connect with the masses and using the medium of radio for deeper reach is the way forward for smaller enterprises.

a single goal, which is to translate the brand values of its product through different media. Also, all 360-degree marketing campaigns initiated by RAKBANK are “call to action” driven. In all communication, the bank advertises its various contact touch points, namely the 24 hour phone banking number, the website address, SMS short-code and social media touch points etc. The number of calls, enquiries and customer feedback through the various touch points are actively tracked to estimate the success of marketing campaigns on all aspects such as understanding of the key message, relevance of the product/service to the targeted market, key take-outs in addition to the number of actual leads and conversions. This helps the bank to be in regular touch with its target market and constantly fine-tune both the message as well as the choice of mediums in its 360-degree marketing campaigns. In terms of owned media, digital and social media has been a

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Intelligent SME

Banking and Finance medium dominated by RAKBANK for a long time. We were the first bank to launch a twitter presence to communicate with our customers. Facebook has been extensively used to create awareness about the products and services and at the same time to provide instant customer service. Our website and the mobile app have been recognized as one of the most innovative sites for its user interface and experience.

ISME: Clever campaigns are

integral in connecting with people and enterprises. What goes behind planning a certain campaign? Could you take us through one of your successful SME initiatives?

BM: The role of a communication

campaign is to create awareness about the single-minded proposition, thereby generating interest and driving potential clients towards the application. The success of a campaign is based on the communication design and reach strategy. One of our recent campaigns that received good response, which was led with a TV spot, focused on a small business namely an automobile garage owner who works hard for his business but is unable to expand due to his work pressures, and, thus, constantly misses out on new business opportunities due to lack of finance. He, then, approaches our bank to provide him a collateral free business loan that enables him to expand into a bigger car showroom. Outdoor, radio, online media as well as social media provided the support needed to reach maximum target audience and engagement.

ISME: Of late, we have seen RAKBANK's hoardings all over the town, especially the one on the Sheikh Zayed Road, occupying a total area of 9,600 square meters. Could you shed more light on some of your advertising endeavors and the importance of the medium in adding visibility to a brand? Which is the best advertising medium in your opinion? BM:

Well, we like to call it the â&#x20AC;&#x2DC;Burj Khalifaâ&#x20AC;&#x2122; of hoardings (chuckles). Our endeavor has

always been to be innovative and connect with the target audiences and get our message across in the best possible manner. When we

RAKBANK has one of the largest communities in social media among banks in the UAE. We were happy to use that for social good, where our followers can support a worthy cause by participating in such campaigns.

conceptualized the SZR hoarding, our idea was to showcase our various business segments, namely, business banking, commercial banking, wealth management, Islamic banking and personal banking along with our products like business loan, insurance, auto loans, mortgage loans, and credit cards. So, we decided to be the first one to adopt it when the opportunity presented itself. We also strongly believe that the campaign objectives should justify the medium of advertising and not the other way round. We use a good mix of ATL and BTL mediums for all our campaigns namely TV, cinema, print, outdoor, radio, online and social media.

ISME: Recently Zurich and

RAKBANK teamed up to raise funds for Manzil Center for children with special needs with #Trulylove Social Media Campaign. Boasting one of the largest communities in social media among banks in the UAE, what makes RAKBANK so active on social media? Could you give insights on your social media strategy?

BM:

We partnered with Zurich to contribute towards a worthy cause, in line with our corporate social responsibility commitments. RAKBANK has one of the largest communities in social media among banks in the UAE. We were happy to use that for social good, where our followers can support a worthy cause by participating in such campaigns. The campaign invited people to post a photo of something they truly love together with a caption on the website trulylove. zurich.co.ae and on RAKBANKâ&#x20AC;&#x2122;s Facebook, Twitter and Instagram and shared with friends and family with the hashtag #Trulylove. For every #Trulylove post, Zurich and RAKBANK donated 5Dhs to Manzil to support special needs education. At RAKBANK, we believe in keeping conversations real through two-way communication rather than to provide another corporate monologue. With this belief, we launched our presence on Twitter in 2010. Today, over 30,000 people follow RAKBANK on Twitter and 120,000 on Facebook. The bank also connects with social media

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Intelligent SME

Banking and Finance users on LinkedIn, Instagram, Pinterest, Foursquare, and YouTube where published videos have received over 1 million views. With an average response time of one hour on week days on both Twitter and Facebook, the social media team at the bank is always there for its followers to deliver a simply better customer experience.

Our mobile banking application is available for all smartphones and can be used to browse information related to the banking and insurance products and services offered/ marketed by us-check balances for all accounts, loans & finances, ...

ISME: Technology plays a very

important role in today’s world. Now, one can bank from anywhere, at any time without actually visiting a bank, with just a touch of an app on your phone. Could you explain the features behind the mobile banking app and how it is different from other bank apps?

BM: Our mobile banking

application is available for all smartphones and can be used to browse information related to the banking and insurance products and services offered/marketed by us--check balances for all accounts, loans & finances, credit cards, deposits or investments, open accounts, request for a card and even check the last 10 transactions in customer’s account or credit card. Customers can also make utility payments and transfer funds from their account to any bank in the world, receive SMS notifications and place service requests. It provides easy access to our websites and social media to find a branch or ATM nearby. That’s not all, customers can browse over 1000 deals across categories ranging from jewelry, fashion, entertainment, healthcare, spas, fine dining and all programs give a bird’s eye view into all offers and showcases the best deals using location based services. The ability to search by category and location ensures that customers get the best deals relevant to them, saving not only money but also valuable time. We recently introduced MobileCash Cardless withdrawals on the mobile banking platform, which provides customers the ability to withdraw cash from any our ATMs without the use of a debit card. Customers could also transfer funds to friends and family within UAE using this service.

ISME: Advertising and PR is critical for businesses but SMEs don’t necessarily have budgets allocated for it. What advice would you like to give the SME owners and aspiring entrepreneurs on increasing visibility and differentiating themselves form the competition.

BM: My advice to entrepreneurs would be to keep it simple. With the advent of social media advertising, good PR is now within the reach of every enterprise whether big or small. It’s not just about advertising, it’s also about meaningful engagement and smart ways to connect with your prospective and existing clients. In my opinion, smart use of SEM (Search Engine Marketing), active presence on social media websites to connect with the masses and using the medium of radio for deeper reach is the way forward for smaller enterprises. ISME: RAKBANK has a diverse Islamic platform, what are the

challenges while communicating the Islamic products as compared to the conventional ones, could you share some thoughts on the same.

BM: The current personality of the bank has been built over a period of time using the four advertising principles, the four Cs: Crystal clear, Confident, Cheeky and Combative. In line with this approach, RAKBANK AMAL Islamic banking was launched focusing on various value-driven products and services and at the same time maintaining the essence of our communication style keeping in mind the Islamic sentiments of the target group. The current campaign “Stop and Think – Does your bank give you Collateral free business finance to expand? Business finance from RAKBANK Amal does” is live across all mediums TV, radio, outdoor, online and social and is generating good interest and response among the target audience. 43

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Intelligent SME

Banking and Finance

Less on selling, more on earning confidence Starting a new business can be a challenging task, as roadblocks you never imagined will crop up. Limited time, manpower, and budgets can all be a factor as the workload starts to pile up and the bills come rolling in. However, a solid team and the right tools to bridge the funding gap could soon help you climb the success ladder, writes Alexander Williams.

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Intelligent SME

Banking and Finance

MES in any economy – developed, developing and emerging - face growth and development issues with regard to access to resources (knowledge, talent and finance), and markets. Moreover their size commands competition too, as being smaller they have limited capacity and capabilities to compete with the larger companies. Yet, they constitute the lifeblood of any economy in good and bad times. The SME segment in most economies typically comprise up to 95 per cent of the total business establishments, contributing approximately 40 – 60 % of the GDP, and about half the labour force. The sector also drives the real economic ecosystem, which includes suppliers to many large businesses and providing subcontracting services to public and private sector organisations. So, what are the major barriers for sustenance in the UAE landscape? Based on our quarterly SME Pulse, which surveys the outlook and challenges of up to 500 SMEs based in Dubai, the top challenge faced is competition. And it’s, certainly, not a bad thing as it indicates the vibrancy and openness of the economy. The other key challenges include the demand for products and services as well as government fees – especially fees for trade license renewals and visas. Notwithstanding such challenges, SMEs are still attracted to, and stay in Dubai for the long term. Many have grown to be successful household names and many more are in the manufacturing sector exporting, ‘Made –In- UAE’ products. While access to bank debt financing is always a challenge for SMEs, and especially for SMEs based in the UAE, Dubai SME surveys show that many of our SMEs are resourceful enough to finance their own growth. They are generally able to tap other sources of financing from partners, pooling, family and friends. Yet there are serious gaps on both sides, i.e. the bank lender and SME borrower, which are symptomatic of a larger issue of Dubai being a non-tax economy where there is no incentive or requirement to have

proper finance and accounting records, or to lend monies. And thereby, it adds to the credit risk premium of banks who eventually charge high interest rates on the loan. Dubai SME, thus, continues to work with the banks and financing institutions to bridge the financing gaps that cover standards in financial reporting, transparency of information and sharing, innovative financing solutions, and overall capabilities of SMEs in financial management. In terms of the gaps of the SME firm itself, we have noticed that several companies do not have strategic planning capabilities, or think ahead for better competitive positioning and differentiation. They do not invest enough in innovation and the delivery of services that will delight customers, even if they have a great product. Hence, it’s absolutely crucial for start-ups and even established

Dubai SME, thus, continues to work with the banks and financing institutions to bridge the financing gaps that cover standards in financial reporting, transparency of information and sharing, innovative financing solutions, and overall capabilities of SMEs in financial management.

SMEs to differentiate their business and service to their customers. A short-term approach prevents them from investing in human resources, information & communications technology, innovation and market development, which are the key drivers for directing their company’s growth & development path and muster the right resources for the future. According to a last year’s survey on 500 SMEs of the region, we found the following alarming statistics:  only 21% of SMEs had advanced IT systems such as ERP and CRM and a meagre 6 % had online ordering capabilities,  only 26 % of SMEs provide ‘need-based’ or comprehensive training to their employees  34% of SMEs have a formal organization structure  Only 50 % maintained audited financial statements  Only 13 % invested and implemented innovation These results clearly show that SMEs in Dubai & the UAE need to upgrade their capabilities and capacities to compete effectively, gain market acceptance, work with other businesses to graduate into larger entities, and be sustainable in the long run. In addition, SMEs need to ensure adequate investment is made on strengthening the company through proper corporate governance, which covers financial governance, human capital development, risk management and strategic development. While shortage of resources will always be an issue, SMEs that are prepared and strong will be able to weather any crisis. From our experience in the Dubai SME100 initiative, we have seen many SMEs improve their corporate development as the implemented corporate governance programmes. These SMEs have also taken a longer planning horizon to build future assets and talent in the business. One of the biggest barriers to execute expansion or avail funding is the requirement of three years audited financial paper required by most banks. So, how can an SME gain funding in

August - September '14

Intelligent SME

Banking and Finance these circumstances? On priority basis, startup owners should ensure that since inception the business is a valuable, bankable and investable entity. In simple terms, it means all the key factors that drive sustainable business growth is addressed at an early stage. If bank financing is not forthcoming, SME founder/owners should tap equity capital as an alternative source of financing. Psychologically, they should be prepared to give up a certain stake of the business in return for capital and other strategic benefits from the investor. Dubai SME has always urged start-ups to be mindful of managing their finances, and to develop the habit of accounting and audit. Since SMEs originate from entrepreneurial individuals, who identify new opportunities in society, and are motivated enough to exploit them, these companies are critical source of employment creation, innovation, new business models, emergence of new niche industries and economic development. They are, therefore, very important to any economy. The Dubai government continues to remain open as much as possible for any bona-fide businesses to establish in the emirate, whether in Free Zones or On-Shore. Moreover, firms that have found a niche serving the domestic market, or using Dubai as a base to diversify exports into the region have found it profitable, and are continuing to grow and expand. For the Dubai/UAE government, the more start-ups and SMEs spread across the region, the better off will be the economy, as the multiplier, indirect impact will be high and positive. So, what are the best practices an SME should adhere to grow not only beyond mediocrity, but achieve meteoric success in the long run? SMEs that invest in human capital, customer engagement, innovation, differentiation and financial management tend to be more successful.

Forward focus:

Sectors related to tourism, covering the aerospace services, retail, hospitality, travel &

For the Dubai/UAE government, the more start-ups and SMEs spread across the region, the better off will be the economy, as the multiplier, indirect impact will be high and positive. transport and food & beverage services are flourishing. Meanwhile, we also believe that the emergence of digital and new media services, as well as the cleantech & renewable energy as potential bets driving new SME growth. Post-financial crisis, the Dubai government and the regulators have ensured that a more robust and market-based regulation is in place to help grow and strengthen these new and emerging businesses. Lastly, we have observed many distinguishing business

characteristics of entrepreneurs over the last 12 years that can influence the degree of success of the business. Some of these characteristic include domain knowledge of the industry their business caters, an understanding of risks & finance, self â&#x20AC;&#x201C; discipline, decisiveness, diligence, a passion for serving customers, and continuous improvement. While some are intrinsic to the entrepreneurs, the other qualities are built on these pre-disposed traits.

August - September '14

Intelligent SME

Banking and Finance

Transforming lending norms for SMEs, the Aseel Islamic Finance way! Stepping into the market to secure funding for your start-up could be a daunting and rigorous process. Across the UAE, it not only requires defining your business model’s potential and position in the market place, or, simply put, the USP of your products/ services, but also three years of audited financial receipts to showcase stability. And thus, to ramp up support for the development of the SME sector, the Shari’ah-compliant finance company, Aseel Islamic Finance, has launched a business solution recently.

peaking about the product, in an exclusive interview with the Intelligent SME, Javed Afzal, CEO of Aseel Islamic Finance, said: “The newly launched service provides collateral-free financing without audited financial statements for a certain amount of funding.

If a potential client requires a higher amount of funding, then the customer needs to provide audited financial statements. Good cash-flow management and fluid working capital is the heartbeat of any business. Therefore, the business solution will take care of customers’ cash flow requirements,

enabling them to operate efficiently and prosper using a service which reflects their values and principles.” Afzal talks about the launch of the service, the need to foster growth in the SME segment and how favourable environment for entrepreneurs can essentially

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Intelligent SME

Banking and Finance accelerate economic outlook of a country. Following is the edited and condensed transcript of the interview:

ISME: One of the biggest obstacles

for start-ups is that they need to have three years of audited accounts to become eligible for bank funding- Are they entitled to the same criterion while seeking funding from Aseel Islamic finance? If yes, do you have any flexible options to support SMEs that aren't three year old?

JA: Aseel Islamic Finance provides

collateral-free financing without audited financial statements for a certain amount of funding. If a potential client requires a higher amount of funding, then, the customer needs to provide audited financial statements. We stipulate a minimum length of business for funding in its credit policy. However, accessing funding from us is not entirely dependent on audited financial statements and a three-year length of business.

it be consumer, SME, corporate or treasury products, and we are keen to meet the evolving needs of all of our customers.

ISME: Take us through your

customised products/ services for SMEs, which offer value-added features and benefits in compliance with Shari'ah principles? At what rate is growth expected in this specialised beat?

JA: We offer a number of business finance products designed to support SMEs by taking care of their capital expenditure, including medical and general equipment finance, raw material finance, office equipment finance and education equipment finance. All products are fully Shari’ah-compliant based on the principles of commodity Murabaha. These products offer several key benefits, including:  With increased solvency and

ISME: Almost 92% companies

based in the UAE represent the SME sector, how do you choose and pick companies that can avail your services?

JA: There are many credit

assessment factors that banks and financial institutions, including Aseel Islamic Finance, consider when it comes to making a decision about providing funding to SMEs: turnover, length of business and average balances in company accounts.

ISME: What was the wisdom/thought process in bringing up a Shari'ah compliant business solution for the SMEs? JA: We launched the new Shari’ahcompliant business finance solution (SMEs) for a number of reasons. Firstly, there is a demand from SMEs operating in the UAE to access business finance solutions that enable them to maintain good cash-flow management and fluid working capital using a service which reflects their values and principles. Islamic solutions also need to cater to every segment of the market, whether



  

liquidity, small businesses are able to manage their cash flow efficiently and have the freedom to take advantage of new opportunities as and when they arise. Companies can ensure they have funds available to pay bills on time and maintain good relationships with their suppliers, whilst waiting for invoices to be paid. Customers can access cash for daily expenses such as utilities, maintenance and repairs, covering their business when costly, unforeseen circumstances arise. Companies have the opportunity to make quick cash payments to get the best prices on business purchases and relieve additional stress on their business cycles. Free Takaful for the company owner is offered, allowing SMEs to protect their business in the case of any unexpected incidents. High finance amounts. Collateral-free requirements. Competitive profit rates.

ISME: What is your biggest security concern when it comes to providing

funding facilities? How do you manage these challenges?

JA: When it comes to providing funding, our security concerns are what all banks and financial institutions face, such as credit risk, financial risk and even reputational risk. We manage these challenges using different methods, including defining a sound credit policy. ISME: With a host of options

available from crowd-funding to banks, how do you tackle competition in this crowded space?

JA: We work hard to try to differentiate our value proposition across several key areas, such as profit rates, document requirements, collateral requirements and Takaful offerings to stay ahead of the competition and attract and retain existing customers. ISME: Lastly, according to you,

what characteristics differentiate Aseel Islamic Finance from others? Why should an individual or an SME choose you as compared to banks or other exchanges?

JA: We represent a strong mix

of traditional Islamic beliefs and heritage that are inherent in our products and solutions. At the same time, we have a progressive, modern and dynamic approach built on pillars of knowledge, trust and transparency. We cater to the needs of SMEs. Already established as one of the leading players in the Islamic real estate market, the newly launched service is embarking on penetrating the SME segment with tailor-made Shari’ah compliant financing solutions whilst maintaining a customercentric approach. Our financing services comprise of end-to-end solutions that meet the needs of small businesses, with goods and services, working capital and more. Moreover, we aspire to become a catalyst in the growth of the SME market in the UAE, sharing the responsibility of the business community and government to expand the segment, which is already playing a major role in the growth of the UAE economy.

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Intelligent SME

Sales and Marketing

tips to find funding for your start-up Entrepreneurs are full of powerful ideas and strategies to implement, but getting the idea off the ground requires a hefty stack of cash. Unfortunately, finding funding options to empower your dream venture can be a taxing exercise. Simon Hodges shares few tips to help you avail the best finance deal for your business idea.

inancing a new start-up or the expansion of an existing business is one of the biggest challenges facing owners of SMEs, but with the huge amount of surplus capital existing in the region, why is this so? Contrary to popular belief that the solution to the problem is not solely down to the lenders changing their methodology and simply lending more, although there are a number of things they could do to help businesses. There is not much that one can do to change the rules, and, thus, the approach must be to work within the rules in a way that gives you the best chance of success. Recently, a private angel investor told me that he receives between 10 â&#x20AC;&#x201C; 20 enquiries every week and, on the other hand, most banks get several times more applications as compared to him. However, the persisting concern is not too many business owners seeking financing, but applications put together in a way that it becomes difficult for lenders to sort them out, resulting in a negative conclusion altogether. In this article I have set out some simple practical steps that you can take to help you make a compelling case for your finance:

Think like a financier

Thinking like a financier is the first and most important guideline. The overriding objective for anyone who lends you money is to get it back. You can argue that you are being charged too much

August - September '14

Intelligent SME

Sales and Marketing but, simply put, you will have to meet their demands and pay up if you want the money. Remember, this is their business and they have to make a profit from lending money. The higher perceived risk, the higher profit (interest) will be expected and, believe it or not, the lower the risk does result in lower costs compared to your competitors. Your job through the application process is to convince them that you fall into the latter category. The first question, therefore, that you need to ask yourself is why should a financier lend to my business? If your answer is broadly along the lines of “trust-me –I-know-what-I-am-doing” – forgive me, but would you lend your money to that person? You might need a bit more to convince you! In your application, the story needs to convince them and not you that your idea is worth supporting. The second question to address is how risky is my venture: the more risky it is, the less likely a bank will provide you with finance and you will need to look to alternative providers that will typically look for a higher interest rate. Try, thus, to reduce the risks by adopting strong governance and risk management processes.

Follow the rules

In order to assess the potential of any investment, financiers have developed tools and systems to help them evaluate the potential of any business idea. While some of these rules may appear to you irrelevant, they will need to be completed before your application can be processed. Making the process work to your benefit will significantly help your case. Speaking first to an adviser who understands how financiers will assess your risks will help you to address those risks upfront and make your application much more attractive. In addition, remember almost everyone you speak to as part of your application process will need to report their bosses too

Simon Hodges, CEO, Alchemy Network Middle East has recently launched the franchise network in the Middle East. Alchemy Network is a UK-based worldwide network of consultant partners, who work alongside owners and operators of SMEs to help bring them financial success, and eventually introduce them to systems that will relieve them from the mundane day-to-day running of the business,and allow them time to concentrate more on what they do best. for a decision. They will only be motivated to do that if they are empowered with enough information to address any query that the person might have. Your job as an applicant is to ensure that those answers are made available. Therefore, prepare well with internal question and answer sessions to ensure that you are ready to present your case in the best possible light.

Financial information is important, but so is your story on how you plan to deliver the results

Preparing the financial statements is a pre-requisite part of the process, but it is the assumptions behind their preparation that are just as important. The financial statements can only provide a picture of what you hope will happen but, in the end, it is the management team that deliver the results. Financiers are much more interested than you might think in being able to look the leader in the eye and get confidence that their money will be looked after.Use that to your advantage, as others often ignore it, and just send in the technical teams, which could sometimes lead to higher costs than might otherwise have been the case.

Do not borrow more than you need

Borrow at a level that does

You must stress test your ideas to understand in what circumstances you would find it difficult to meet your repayments.

not stress your business. In the immediate aftermath of any expansion, businesses almost always suffer from cash flow shortages as it takes time for trading levels to reach the levels necessary to meet the extra costs growth causes. Before the financial crises, advisors were convincing borrowers that it was better to borrow as much as possible because it would reflect well in financial ratios and make the business more attractive. However, this hides the fact that interest and capital repayments still need to be made on time, not to mention the increased overheads you will have from the enlarged business. Accordingly, you must stress test your ideas to understand in what circumstances you would find it difficult to meet your repayments.

Contribute to the amount required

Would you lend to someone who did not use any of their own money to back their idea, I think not. I appreciate that it is sometimes difficult particularly for a new start-up to find any capital, but one should consider all possibilities of getting some of the money from family or friends before seeking financing from professionals. For those of you running a business today, make sure that the way you prepare your financial statement show that you are putting aside at least a part of your profits in the business as retained earnings. The bankers will typically only lend against your balance sheet strength and this is not something that can be corrected over previous financial years. It is, therefore, beneficial to bring on board professional accountants at least a couple of years before you need to seek financing.

August - September '14

Intelligent SME

Sales and Marketing

Weighing the risks before starting up a business

August - September '14

Intelligent SME

Sales and Marketing

ew business owners take the plunge of heading straight into working for themselves. For many of us, it requires a brave leap from the security of a safe job, where we have regular wages, bosses taking the responsibility, accountants worrying about P&L and admin staff for paperwork and ordering. In fact, many employees only need to adequately preform for keeping their jobs because it’s often too much trouble to find a replacement. Moreover, the reasons we choose to work for ourselves tend to be the same. We want freedom of choice and don’t like being told what to do, especially from people whom we perceive as inferior in capabilities. We wish to spend more time with our families, leave legacy to our kids or just want to earn more. The reality, as many of us are aware, is that up to 85% small businesses fail in the UAE within two years because of many reasons. Often these reasons are linked to their previous knowledge of working for a larger company, where resources are often abundant along with investment for marketing and sales. Skills from the big company do not necessarily translate to a small company. In fact, they can often spell doom if applied. Besides a one-person enterprise needs engagement and application of different set of skills. So here’s a list of tips that have helped me to achieve decent success so far.

Invest in learning

As an entrepreneur, you have done a brave thing by deciding to start a business, and managed to take the big leap. It’s almost the case of spotting an opportunity and taking the required action. And, thus, we are leagues ahead of many other people already. Now, we end up doing a daft thing and put someone with no qualifications or experience in charge of the business – ourselves. It’s highly recommended that before setting up a business, one should invest in the skills required to run a business. You could be posed with the challenge of growing a business with limited funds, thus, consider strategies to

An experienced business trainer, Phil Bedford brings over a decade of experience to his role as master franchisee for the Referral Institute. His expertise and experience of working with both companies and networking associations, coupled with a passion for training have helped him immensely. He regularly appears as a speaker in the UAE and abroad, educating people on how to build their business by word of mouth and “creating referrals for life.” market the business and explore the different means of initiating sales conversations? How can we get a website at a minimal cost? How to keep a track of accounts? It’s best to build a roof before it rains, not afterwards. For starters,

find companies that can help you in the following areas:

How to build a referral network and leverage on networking sales skills,

Attend a program on entrepreneurship to learn what the future holds, Basic accounting course for business owners and Consistently attend training programs and events to keep building your skills as a business owner. The main mindset change here is that you need to invest personally: you can no longer expect your company to pay. Hence, set aside a budget to learn regularly, which could be about 10% of your total income

Outsource

Rather than rushing to employ as many people as you can to do

Up to 98% of business say they rely heavily on networking for new business and it can be the key to survival with limited funds.

all the jobs, consider outsourcing. A variety of companies offer services on hourly payment or project basis. As a new business owner your primary role is to get business. Expecting others to get the business will result in extra required resources which may in the early stages add excess pressure to the bottom line. Simply put, when you try to do it all by yourself for saving money, you will arrive a point where it might burn a hole in your pocket. Consider outsourcing: personal assistant/ admin, accounts, marketing and recruiting

Surround yourself with positive people

Yes, this is called networking. Up to 98% of business say they rely heavily on networking for new business and it can be the key to survival with limited funds. However, networking doesn’t just stop with getting business, but also provides information and support. As a business owner, you will often find yourself on your own, nobody to bounce ideas off and selected people who understand your new concerns and challenges. If we can find people who are also business owners and, especially, if they are at a more advanced stage of growth than us, this can become an invaluable resource of advise /support and mentorship. Their experience and advise can be invaluable because they understand in a way that often our friends and family cannot. Successful people also like to help others. So, yes, pull down your pride and ask for help. You can find a big bunch of successful people in networking groups like BNI or form a Master Mind group. The key point here is: you do not have to do it alone, even though you now work alone.

August - September '14

Intelligent SME

Finance

Time to bridge the financial literacy gap Not everyone is a wiz at number crunching. Majority of small business owners are ideadriven people. But reality comes at you hard! So, educate yourself, get a good grasp on finances and cash flow, as this will help you make sound decisions and keep your company thriving, writes Neil Petch.

tarting and running a business takes not only hard work and passion, but knowledge and information too. Ultimately, the ability to make sound financial decisions is the single most important driver for success in a small business set up. And yet, most business owners, by their own admission, donâ&#x20AC;&#x2122;t have the financial knowledge required. This is a major disadvantage. Lack of financial literacy is the

main reason why so many small businesses donâ&#x20AC;&#x2122;t survive past their first year; it is estimated that whilst 85% of startups manage to make it through their first year, just 50% survive through the second. Itâ&#x20AC;&#x2122;s a sobering fact. Ask any entrepreneurs about what they would have done differently, if they had a do- over, and the unison response would be that they desired possession of a better understanding of the financials of

their business. Clearly, financial knowledge is what sets apart the 50% who manage to go past the first and second year of operation. And this begs the question: if financial education plays such a crucial role in the survival and longterm success of a small company, how can we, as a community, ensure that we provide support to encourage and advance financial literacy among the ranks of small

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Intelligent SME

Finance business owners in the UAE? At Virtuzone, we believe that financial literacy should start as early as possible, at the company formations stage. We try to make our customers aware of the impact the choice of entity can have, with its different levels of liability protection: for e.g. sole proprietorships generally provide little protection; on the other hand, limited partner interests and member interests in a limited liability company may offer greater protection against any liabilities of the business entity. But beyond company formation, small business owners need to empower themselves, by seeking key information and the tools that will enable them to make sound day-to-day financial decisions, and manage financial tasks from payroll to accounts payable; as well as pursue business opportunities that would be most advantageous to them. And to do that, they need to speak the same language as banks, investors and VC, and any other relevant parties.

Neil Petch is chairman of Virtuzone, one of the most dynamic and fastest growing company set-up operators in the region.

And above all, ensure you are transparent in your operations and get audited once a year by a certified party. Keeping business records is not only good practice, but also helps you focus your efforts and increase profits, because it shows at once, at any given time, how your business is doing. And then there’s the compliance and due diligence aspects. If you wish to be eligible for a bank loan, pitch for new investment, or sell your business at some point, your financial records are the very first thing everyone will ask for.

Let’s start with the basics: Understand how money works. As a business owner you

must be able to understand basic finances: how money works, how you spend and make money, and how this dynamic impacts on your profitability. Take cash flow for example. It’s essential to know when you expect payments, and when bills are due. It’s also important to know the months when your can expect a sales dip in order to prepare any big payouts. These are just some of the common tasks that small business owners should be able to manage daily without a glitch.

Don’t forget book keeping.

Are you going to be looking for an investment or a bank loan in six months down the road? Then, you need to make yourself desirable to these parties, and book-keeping has its pluses. You can keep a record on your own, using a plain excel sheet, or a friendly and time saving accounting app. If you can afford it, get help from a accountant.

Pick the right financing strategy. Choosing the right financing

strategy has a tremendous impact on the growth of any business, especially for a small company or a start-up in its first 2 -3 years of operation. The bottom line is that when you need to raise a significant amount of capital, there are only two strategies to choose from: debt or equity. And so, the main question is which one will you

Keeping business records is not only good practice

You need a brand identity that is relevant to your business and looks professional and distinct too. So,when you see it placed on yourwebsite or on your door, on business cards and collateral materials, it stands out. go for? The answer depends on several factors, from the long-term objectives of your business, to what you feel most comfortable with. Finance professionals call this process ‘structuring’ your business finance, and the right structure can mean the difference between building a sound company in a matter of years, or sinking in debt in a matter of months. So, the first step in determining the strategy that’s right for you is to understand the implications of both debt and equity. In its most simplistic form, debt is the money borrowed, whilst equity is money traded for ownership in the company. Of course, there’s a lot more to achieving financial literacy and there are plenty of resources available to help you navigate the complexities of running a business and getting the financial aspects right. The key is to start somewhere, and soonest!

August - September '14

Intelligent SME

Business Law

Evaluating 'clause' curbing staff to work for a competitor It sustained the employer’s right to stipulate a non-competition agreement/clause, and at the same time it required certain restrictions and conditions on such agreement/ clause to protect the employee’s freedom to work. Explains Kashwani Law Firm.

ne of the most persistent and procuring issues that confront both employers and employees on almost a daily basis is the agreement on non-competition against former employers. The frequent confusion in this regard is usually confined to the conditions required for such agreement’s validity and effectiveness, in addition to the legal consequences that can arise from it.

Keeping it balanced

While drafting the federal labor law, the UAE legislator tried to keep all parties’ interests in some form of balance. He attempted to grant the employers a right to stipulate –whether in the employment agreement or in a separate agreement- that their employees are not allowed to join other competitor employers upon the termination or end of their employment. On the other hand,

the legislator did not leave the door opened for the employers’ sole discretion to enforce such agreements and abuse this granted right against their employees. As freedom to work is one of the constitutional general principals.

Validity

Article no. (909) of the Federal Civil Law and Article no. (127) of the Federal Labour law provided several conditions for the validity

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Business Law of a non-competition clause/ agreement. These conditions are: a) the employee should be at least twenty one years old when entering into such agreement; b) the nature of the employee’s work must allow him to be in acquaintance with the empolyer’s client lists and/or his work secrets; c) the non-competition agreement should be limited by a time period; d) it should also be confined to a certain geographical zone; e) moreover, it has to be restrained to the jobs of similar nature; f) and finally, this agreement should be restricted to only the adequate proportion required to protect the employer’s legitimate interests.

Non-competition agreement/clause must be explicit

The notable issue here is that unlike comparative legislations in other states, non-competition agreements/clauses in UAE Labour and Civil laws cannot be impliedly presumed, as these agreements/ clauses must be explicit and the intentions of both parties has to be clear in order to be valid and effective.

Courts interpretation and application

Dubai Supreme Court has been conformingly applying the said articles and adopting a narrow criterion where all the mentioned conditions must be collectively met in order to validate a noncompetition agreement/clause. In its judgment of the labour case no. 105/2008, Dubai Supreme Court emphasized that this sort of agreements are only an exception to the general principals as ‘’the absolute prohibition will be a complete waste of the employee’s freedom’’. It further confirmed in this judgment that for a noncompetition agreement to be valid, the prohibition must be for the protection of a serious interest. It has to be proportionate through being restrained by fixed term, place and kind of work.

Consequences to the breach of a non-competition agreement/clause

Further, in the labour case no. 58/2008, Dubai Supreme Court decided that upon applying

eyad Ahmed Abd El Aziz has worked at Kashwani Law Firm Z since 2012 He specializes in Corporate Law, and heads the Corporate & Maritime Department.He provides legal counselling and advice to top and high profile clients. You can contact him at zeyad@kashwanilaw.com

From my experience, most of employers are not aware of the legal conditions stipulated for the validity of non-competition agreements/clauses. They mostly resort to non-professionals to draft them. the rules indicated in article no. (127) of the Labour Law, when an employee breaches his obligation not to compete against his former employer for a limited term, the former employer shall be entitled to claim all incurred damages. However, the court established that the nature of this breach of obligation is contractual. This consequently means that the former employer will not be granted compensation by only proving the occurrence of a violation, but also he has to prove that he suffered actual damages as a result of this violation.

Common misperception

From my experience, most of employers are not aware of the legal conditions stipulated for the validity of non-competition

agreements/clauses. They mostly resort to non-professionals to draft them. The common reason why employers tend to do this, is their belief that there are no restraints on their right to prohibit their employees from competing against them. Accordingly, employers prefer to save time and money needed for consultancy. As a result, most of these agreements/ clauses are invalid and unfortunately, therefore get rejected by courts. Meanwhile, employees –who are always in a weaker positionmost often sign non-competition agreements/clauses without consulting with a lawyer. This usually happens because they do not realize the serious impacts of such agreements/clauses on their careers and lives upon ending their services. These impacts can be manifested in the form of tremendous amounts of damages being claimed by their former employers, and/or prohibition from performing the only job they are familiar with for a relatively long period.

Conclusion

In sum, clearly the Labour Law in UAE took into consideration the mutual interests of both the employer and the employee. It sustained the employer’s right to stipulate a non-competition agreement/clause, and at the same time it required certain restrictions and conditions on such agreement/ clause to protect the employee’s freedom to work. Notwithstanding that the sole determiner on the validity of this sort of exceptional agreement/ clause and whether its violation resulted in actual damages or not, will only be the competent court.

August - September '14

Intelligent SME

Insurance

Human capital, the most overlooked asset class Managing human capital is a key component to avoid pitfalls along the path we call, life adviser Sandi Saksena. 58

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Intelligent SME

Insurance

ME owners who are busy acquiring symbols of achievement - cars, homes, jewelry for the spouse, expensive schools for their kids, yachts, golfing, vacations, and the never ending list of a good life. How did you manage to accomplish all of this in a shot span of time? It wouldn’t have been possible unless you inherited money or won a lottery, and if it’s neither of the said circumstances, then, it is your human capital. They drive your income and help you in building your financial assets. You have earned this money deploying your human capital. You have to agree that your human capital is critical to your overall success in building financial wealth and achieving life’s goals. Effectively, managing human capital is a key component to avoid pitfalls along the path we call, life. So what is human capital? Management books define human capital as your talent pool, skills, education and experience. Let me ask you, do you get your expensive car, boat, other expensive equipment/ machinery serviced, and do you have maintenance records? Have you got the correct insurance often at a higher premium because the car is expensive? You have done research on the cost of neglect, replacement parts and thus, you are alert while using your precious possessions. Just as the car, boat, etc., have a wear and tear cycle, so do you. Accept it or not, your life is full of stress that leads to a lot of illnesses, which includes hypertension, diabetes, cancer, heart attacks etc. Economic impact of heart attacks, cancer and diabetes: direct medical costs after a heart attack include: ambulance, diagnostic tests and hospital charges. On the other hand, a possible surgery could lead to long-term maintenance of heart disease is also expensive. The costs include: drugs, testing and cardiologist appointments. The largest indirect costs are lost productivity and income, though many people may be able to return to work a few months after having a heart attack. The financial costs of cancer are high for both the person suffering

Sandi Saksena is a financial planning counsellor with over 15 years experience in advising on life, disability and critical illness insurances. She focuses on exit planning for SME owners, working with accountants and lawyers to provide holistic solutions. Sandi can be contacted by email (sandra. saksena@nexusadvice.com) or by mobile (0506517963). and his/her family on the whole. One of the major costs of cancer is the treatment. No health and critical illness insurance and other barriers to health care prevent many from even getting good and basic health care. Uninsured patients are more likely to be diagnosed with cancer at a later stage, when treatment can be more extensive and more costly. In fact, this leads not only to higher medical costs, but also poorer outcomes and higher cancer death rates. Cancer costs us billions of dirhams. It also costs us the people, we love. Reducing barriers to cancer care is critical in the fight to eliminate suffering and death due to cancer. About 35 per cent of the Diabetes cases in the UAE remain undiagnosed, which increase the medical costs and complications arising out of a largely preventable disease. In the UAE, the prevalence of type 2 diabetes is among the highest in the world. About 13 per cent or one in eight of the adult population in the UAE are diabetic, more than double the global average of 6.4 per cent. Validating the observation, Dr Alfons Grabosch, consultant for disease management at Daman said, “Everyone who’s a payer (patient and government) will end up paying more for diabetic related conditions than ever before if the condition is not tackled immediately.” Medical cost due to diabetes and pre-diabetes in the UAE is forecasted to rise to an annual $1.04 billion (Dh5.14 billion) by 2020, and this will come from your pocket if you are a part of this group, as Diabetes is not covered or costs more by many medical insurers. Covering people with pre-existing conditions is more expensive, as it will be at a higher rate than healthy people, a rate that would protect the insurance

company from the greater costs of their coverage. Who is Uninsurable? Mostly those who are sick to begin with: They have heart disease, diabetes, cancer, and other pre-existing conditions that set off alarm bells for insurance sellers. Ask why the already sick can’t buy insurance and you get an immediate and seemingly obvious answer—their health costs are too high. Imagine if you had to foot those bills! So you are an asset, and one that is critically important to your overall success. While much time is spent with advisors on the financial components of one’s life, it is equally important to focus on your human capital. It is your human capital asset that drives your financial asset accumulation. So, can you change the way you view yourself? Because you are your biggest asset. It’s called labour capital, which is often underestimated by your accountant/financial advisors. Perhaps your numbers guy will understand this! According to Larry Swedroe in The Only Guide You’ll Ever Need for the Right Financial Plan, coauthored with Kevin Grogan and Tiya Lim: If you’re self-employed, you’re a stock. If you enjoy the stability of your position by the stability of an earned income, you are a bond.

Bottom line: Treat labour capital with the same respect, you accord your business. Integrate ‘you’ into your financial plan. This means spending money on the most important things in life, saving, money for a time when your labour capital is exhausted, and ultimately giving money to the people and causes dearest to you. 59

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Intelligent SME

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Supervis

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Corporate Governance

Banking on good governance The reasons for the global financial economic crisis were many and varied, poor corporate governance lay at the heart of the matter. Not only in the sense of leading to illegal activities, but also in the wider sense of enabling incompetence and poordecision making, points out Mark Fisher.

orporate governance failures have struck in many industries, with disastrous consequences for those affected. Spectacular examples in recent years include Enron, an energy company that collapsed in 2001, and WorldCom, a telecoms giant that went bellyup in 2002. Lax oversight and

inadequate compliance controls at both US companies enabled financial malpractice to flourish. Shareholders lost money and much hand-wringing ensured, leading to the strict - some would say overzealous - tightening of corporate governance legislation known as Sarbanes-Oxley. Significant as these cases were,

they did not lead to systemic difficulties for the wider economy. The fallout was contained. But when financial problems devastated US and European banks after 2007, beginning with the implosion of Lehman, the impact was felt well beyond the banks themselves. The entire global economic system was threatened

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Intelligent SME

Corporate Governance as companies in many industry sectors around the world lost confidence in the future and in some cases collapsed, or struggled to survive. The reason was that finance is the lifeblood of all economic activity and when it stops flowing everyone suffers, from multinationals to SMEs and from labourers to multi-millionaires. Though the reasons for the global financial economic crisis were many and varied, poor corporate governance lay at the heart of the matter. Not only in the sense of leading to illegal activities, but also in the wider sense of enabling incompetence and poor-decision making. Governments, regulators and banks themselves have since taken steps to clean out the stable. Many of these centre around the ideas underpinning 'Basel 111', which is a global voluntary regulatory standard that aims to improve bank capital adequacy, stress testing and market liquidity risk. Efforts have also been made to move away from a culture of short-term thinking in financial institutions, based on their most recent financial statements and share price, towards a longer term focus on a sustainable business model. Measures have also been taken to curb high bonuses for bank employees, seen by many people as leading to unnecessary risk-taking. Action taken in the UAE includes a cap on the amount of credit that domestic banks can extend to government-related entities, as well as a possible review by the authorities of the framework of lending by banks against shares. Such measures are designed to have a positive impact not only on the banks themselves but also on the banks' customers and clients, and through them on overall economic activity. Globally, the aim is to restore trust and confidence in the banking system through genuine and substantial reforms, so that a financial crisis on the scale of the one that began in 2007 can never occur again. Time will tell whether this is indeed the case, but it is clear that economic activity has staged a revival and the banking system is again performing its central role

Mark Fisher is vice president, corporate communications, at NASDAQ Dubai. He has worked as a solicitor in Hong Kong and the UK.

SMEs are accustomed to having their own corporate governance questioned by banks, which often closely assess the quality of leadership at a business and the veracity of its accounts before they will extend a loan. of enabling businesses to prosper. The UAE is one of many economies where this is evident. For an SME, the importance of good corporate governance in the banking system leads to an interesting role reversal. SMEs are accustomed to having their own corporate governance questioned by banks, which often closely assess the quality of leadership at a business and the veracity of its accounts before they will extend a loan. Equally, SMEs would do well to assess the corporate governance of a bank before entering into a close relationship with it. A well

RNANCE

GOOD CORPORATE GOVE

run bank is more likely to be profitable and therefore able to grant a loan at competitive rates than a poorly run one. It is also likely to employ better loan officers who operate to more efficient standards. And it is less likely to run into financial problems that would reduce its ability to make new loans to its customers. Hopefully the painful corporate governance lessons of the global financial crisis have been learned. If so both the banks and their customers will be the stronger for it.

The importance of good corporate governance in the banking system leads to an interesting role reversal.

August - September '14

Intelligent SME

Leadership

Tall traits for playing 'follow the leader' game Leaders who discipline themselves to consider others around them as being an extension of themselves will easily get others to want to follow them. writes Michael J. Tolan.

efore computer games hijacked the playground of childrenâ&#x20AC;&#x2122;s entertainment, we had simple offline games that would occupy our leisure time, and 'follow the leader' was a popular one in the latter category. According to the rules of the game, the player was posed with a challenge to stand in the front of the line and initiate various moves that were to be copied by the group. Anyone who does not mimic,

precisely, was removed from the game. The leader of the game would try to throw off the rest of the group with unpredictable moves in a noticeable attempt to make them lose. The strategy of the game for everyone but the leader, was to follow every move, gesture and pose, to be become a carbon copy. The last person standing behind the leader would then take over as the new leader, thus, providing the challenge and reward for the game.

As leaders in business today, many are perceived by their employees as moody, unpredictable and ready to throw anyone overboard that cannot predict and adapt to the next move ahead. The differences are clear that the game allows players to meet a challenge led by someone, who is trying to get as many people to lose the game as fast as possible, whereas in the business, the leader should desire their team to follow

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Intelligent SME

Leadership without demanding that they possess the powers of ESP. If you are in a leadership role, you might require quick reading of essential traits needed to establish the magnetic pull among your team mates.

Intentional positive communication

Do the members of your team know exactly what you want them to do? Assuming this can be hazardous, therefore frequent good and positive communication, without the blame card, could work better for you than internalising your frustration. The new inspirational leaders do not practice public humiliation and criticism while correcting the actions or behaviors of their employees. As your employees spend more time with you each day than their own families, it is your responsibility to develop them into shining examples of excellence within your team. One-to-one coaching, nurturing their strengths and dismissing the smaller mistakes can go a long way to encourage loyalty and pride in the work place. As Dale Carnegie suggests, “catch them doing something right!” Praising in public and correcting in private will foster trust and a desire to be at the top of their game. Communication is never effective if the person on the receiving end has to cringe or hide under their desk when you are about to provide your input. Gestures and facial expressions may be subtle, but they communicate loudly. Remember that as the leader, you are the center of attention whether you like it or not. Your mood will either enthuse or hinder the progress of your team. They will notice, even if you do not, the look that you give a subordinate when they are not giving you what you demand. They will all see themselves in the place of anyone else on the team who is being bombed with negative energy from you either through words, disapproving or unkind facial expressions or looks. Remember that non-verbal communication represents the majority of all communication and therefore, you are being caught on

Michael J. Tolan is a speaker, writer and corporate mentor and board advisor to several organisations. He is the creator of Mission I’m Possible series of motivational workshops through FirePowerLeadership.com and is the Chief Inspirational Officer of the World Class Academy of Excellence (Follow him on Twitter mtolan@worldclassgroup).

The new inspirational leaders do not practice public humiliation and criticism while correcting the actions or behaviors of their employees. camera in their minds for every single moment of movement. This power can be used positively to give a subordinate a knowing smile of approval and can bolster and sustain them for longer than you could even imagine. Moreover, once you have put into practice positive communication within your team, you will have the advantage of leveraging this to the next level by openly practicing a rewarding culture of voluntary positive performance.

“Leaders who discipline themselves to consider others around them as being an extension of themselves will easily get others to want to follow them.”

Every day the head of a business is faced with dealing with external and internal issues that can often be unpredictable. The better you are able to cope and to compartmentalize these challenges with grace and responsibility for your own reactions will lead to you operating a stable workforce. Is recognition of your employees still important in today’s business environment? What systems does your business have in place to do this on a regular consistent basis? Are you the type of leader that hands out a trophy, or, a ribbon once a month, or once per year and does little in between to drive the message of, “we need people like you to get us to where we need to be?” You could start a low cost, highly effective campaign from today by simply using the sincerity and appreciation for the people who have joined your quest to

succeed. Imagine that you are alone, without anyone at all to assist you, and you will quickly appreciate all the help that you have. If you are upset about an issue from the bank, a client disappointment, your home life, does this really need to be sprayed upon your team members like an ‘anti-air freshener’? Protecting your team from non-relevant issues is part of your job,but, remember, they were looking for a job when they found you. If you really want to excel and go farther than you did before, you should be prepared to practice new strategies with the people who are tied to you and your own performance as a leader. Let them know how important their role is, and how they can increase their own ability to shine within the team. A simple kind word, a friendly greeting often can sustain their thirst for appreciation and recognition daily. While it is typical for many leaders today to moan about the lack of motivation of their employees, ask yourself the question: What is driving their behavior? At the end of the day, it is the leadership that determines the movements and progress of a successful business unit. When people who work for an organization, see and hear that their leader actually cares, it will become evident that you will be the leader that everyone will want to follow, no matter what is the task at hand. Be the Leader that everyone will want to follow. Take the Lead.

August - September '14

Intelligent SME

Tourism

Expo 2020, and opportunities for SMEs

The Expo 2020 is anticipated to attract 25 million visitors over the six months it is staged, with business expected to surge in sales during the seven years leading up to it, solicits Karen Osman. 64

August - September '14

Intelligent SME

Tourism

he hype surrounding the Expo 2020 bid was unmissable – from demonstrating our support to celebrating when Dubai was selected to host the world expo trade convention – there is no doubt that it brought a feeling of confidence and optimism to the market. But now that the dust has settled, what does this win really mean to SMEs and the travel and tourism industry and how can this momentous event be maximised? According to experts, the appointment of the event is likely to generate significant economic benefits for Dubai and the UAE as a whole with a substantial positive impact on the tourism sector. The Expo is anticipated to attract 25 million visitors over the six months it is staged, with business expected to surge in sales during the seven years leading up to it. A noteworthy contributor of this expected upturn is the Dubai Government, as the hosting of Dubai Expo 2020 will require substantial investment, which will in turn generate commercial opportunities to the private sector. As the city continues to strengthen its infrastructure with additional luxury resorts and entertainment attractions, Dubai expects to see its hotel inventory double from over 82,000 to around 164,000 hotels and hotel apartment rooms by 2020 and the development of several leisure projects. This is particularly encouraging for businesses within the tourism and hospitality industry, which will witness key growth in direct and indirect opportunities, estimated to account for 40% of the total of new jobs created. These figures do sound very promising especially for companies within the travel and tourism industry, but there is an overall reservation within the SME community that projects resulting from the Expo 2020 will only benefit the larger, more established companies. So where does this leave SMEs? Referring to recent statistics from the UAE Ministry of Economy, the SME sector currently accounts for 92 per cent of the country’s total registered companies, 86

Karen Osman is the managing director of Travel Ink, a creative copywriting and translation company that caters exclusively to the travel, tourism and hospitality industry. Focusing on helping hotels, airlines, tourism boards and other tourism related companies with their content requirements, Karen Osman has over fifteen years of experience in publishing, communication and marketing across Asia, Europe and the Middle East. She can be contacted on Karen@group-ink.com

The Expo is anticipated to attract 25 million visitors over the six months it is staged, with business expected to surge in sales during the seven years leading up to it. per cent of the workforce in the private sector and 40 per cent of the GDP. With SMEs contributing considerably to the country’s economy, it is no wonder that the Dubai Government is working on ensuring that SMEs are able to benefit from Expo 2020. Although there is no official announcement on this yet, DubaiSME is currently producing a 2020 document that will outline the commercial opportunities. Expo 2020 is expected to produce 300,000 direct new jobs and it’s estimated that one million indirect opportunities will also be created, so what can SMEs do to capitalise on the appointment?

•

Focus on strengthening and building existing relationships with clients/customers • Develop competitive advantages • Put an emphasis on business development • Be price and brand competitive • Define which opportunities to capitalise on • Ensure your company has the required strengths and resources. Whether or not Expo 2020 will attract the expected number of visitors, or create the impressive number of jobs, it has already provided a major boost for the economy and work force confidence. According to the quarterly business survey conducted by the Department of Economic Development, the Dubai business community has been significantly more optimistic during the first quarter of 2014, compared to the same period of last year. This optimism is linked to the positive and progressive perception of Dubai, which is credited to the Expo 2020 win and is expected to increase substantially. SMEs should be prepared to leverage on this euphoria and confidence in the market, which essentially will support growth, create more demand and increase business opportunities.

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Intelligent SME

Column

The honest course to growth Utpal Bhattacharya on why the relationship between an employer and its employees should be based on the principles of honesty and fairness.

ean Paul Getty, the great American Industrialist, once said: “The employer generally gets the employees he deserves.” Nothing can be truer than this pithy, power-packed sentence. It is so blunt a message that you almost know how, generally, an employer would be, when you meet the receptionist, the first touch-point as you walk into an office for a meeting. If you are astute and observant, then a bit more of looking around could give you a better feel of the place, although you could be absolutely wrong, as these faces that you might have been watching, were those of misfits, who were on their way out or being sacked! Many successful entrepreneurs will tell you that beyond a point in their businesses, they were able to hire the right employees that helped on fuelling further growth. And, yet very few will ever tell you that things could have been even better if they were alert enough

not to have let a few brilliant ones leave. Recently, I was at an exhibition, listening to an employee talking about a line of activity which he had set up for the group. It was a profitable venture and all poised to leap to the next level. I asked him if we were getting the credit from the group and the management at the top for having delivered such a wonderful line of business so successfully. His face fell, his smile waned, and he replied: “My designation has remained the same, my pay packet has not been revised, but occasionally my chairman does mention in the passing that I am contributing well.” And after a pause, he asked: “But is that good enough after what I have delivered with all honestly and loyalty, from concept to where we are today?” Of course, it was not enough. In the course of our meeting, I also realised that he was planning to leave the group and set up his

Summing up

own enterprise, as he had the domain knowledge of this line of business. If he had delivered once successfully, second time around, he was more than likely to do better. The Group, probably, does not deserve him, as Getty would say. He is too smart and entrepreneurial to be kept bottled up without incentives and rewards and prospects of further growth. Sometimes an employer forgets that they are getting paid by their employees rather than the other way, and if an employee is helping to earn more to pay them more, then they have to recognise that this employee is smart enough to understand that he is getting not fairly treated. What would such an employee do? Of course, look for options, and try and find out where he would be treated better. But think about it, how “un-thinking” an employer would be not to take care of that employee who has been responsible for increasing the profitability of the company?

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