The Intelligent SME by Spi Publishing

Special Focus: SME Financing

Youâ&#x20AC;&#x2122;ve filled out the loan application properly. Would you like an immediate denial, or one with an added drama of time?

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Jail time for bounced cheques now a thing of the past

Marketeers are now scanning brains for increasing sales

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Enable

11 COVER STORY

A “culture of transparency”

6 10 12

Business Updates

14 22

Guiding SMEs to success

15 CNG - cars soon a reality

SME finance now a reality

No jail for bounced cheques

A wholesome recipe for film

Unravelling the “buy” button

Disclaimer: SPI Publishing has endeavoured to bring out a publication that is reliable and informative. This is true to the best of our knowledge. However, SPI does not make representations or warranties on the accuracy, reliability, completeness or currency of the contents. 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.

Ranking the SMEs Enabling SMEs, the way forward

Federal Credit Bureau to boost SME financing

CONTENTS

❘ Contents

Enlighten 28

Small proposition – Big opportunity

34 36 44

Power of PR

Making noise without screaming

Segment and differentiate, or be at loss

Idea vs passion, what really matters?

A zone of opportunity

Single click to cybercrime Selling in a challenging environment

Engage 54

‘Mixing business with pleasure’

SME Partnerships And Egypt’s Experience

59 60 62 66

Time management is a myth Events Calendar Toys for the CEOs One Last Word

Editor’s page ❘

EDITOR’S NOTE Winston Churchill once said that there is nothing wrong with change, if it is in the right direction.

At SPI, we believe in the dynamics of change. Change is ubiquitous and constant, and is felt in every aspect of life. As we publish and launch the first edition of The Intelligent SME, our focus is to represent the winds of change that is influencing the thinking of a whole new generation in the Middle East, and particularly the UAE, which has been such a fecund ground for entrepreneurs from around the world.

The small and medium enterprise sector covers about 90 per cent of the UAE economy. While it remains one of the pillars of the country’s gross domestic product, it gets modest media attention and, even lesser interest from financiers. Our endeavour, through this magazine, is to secure for the SME sector

Chief Executive Officer Shantanu A.P Account Director Vijay G. Editor Sandhya Divakaran Consulting Editors Utpal Bhattacharya Trevor Lloyd Jones Expert Contributors Rustu K Soydan Umer Razzaq Alexandar Williams Ludger Moreas Dr Swaroop Savanur Zed Ayesh John Lincoln Kristina Nyzell Cecilia D’Cunha Anesh Jagtiani

its rightful place.

Creative Director Mohsin Rawal

We believe that the UAE’s small and medium enterprises need a platform to

Creatives Aneesh Varghese Hoze M

highlight their successes. The Intelligent SME will endeavour to be that platform, while also serving as a vehicle for this sector’s media and information requirements.

A lot of thought has gone into the conceptualisation of The Intelligent SME. We, finally, decided to section the magazine under three heads to accommodate myriad thoughts and suggestions: enable; enlighten and engage.

In the “enable” section you will mostly find the latest news and developments in the market, while the “enlighten” section will deal with experts’ views on a range of issues from economy to enterprises. The “engage section provides a platform for enterprises to make themselves heard, through networking and information exchange.

Editorial Enquiries & Contributions Tel : 04-2659704, 04 - 2650312 Fax : 04 - 2690566 E-mail : editor@spiholding.net Sales & Marketing Jaswanth Prakash Lima Farren Cindy Advertising Enquiries Tel : 04-2659704, 04 - 2650312 E-mail : info@spiholding.net Subscription Enquiries Tel : 04-2659704, 04 - 2650312 E-mail : subscribe@spiholding.net

We hope that you will find the content of the magazine useful and an enjoyable read. And lastly, we do expect feedback from you on our first edition. Please do write to editor@spiholding.net with your comments. We will eagerly wait for

Distribution Mohammed Adil Hisham Gangaram

your e-mails. Publisher SPI Publishing Post Box: 89735, Dubai, UAE Tel : +971 4 2659704, 2650312 Fax : +971 4 2690566, 2651708 E-mail: info@spiholding.net Website: www.spi-holding.com Printer Al Nisr Printing Press

www.spi-holding.com www.theintelligentsme.com

Business News ❘

Local Updates New finance product by EIB

Resource centre for women entrepreneurs launched

mirates Islamic Bank (EIB) has recently announced the launch of a new personal finance product - “Investment Murabaha.” With this product, customers will be able to purchase Sharia compliant shares listed on the Abu Dhabi Securities Exchange or Dubai Financial Market. The customers can hold or sell their shares depending on their objectives - growth in their investments or enhancing their funds flow. The product is for UAE nationals and as well as expats and is based on the Wakalah or Murabaha structure.

“Investment Murabaha” is available in all 31 branches of EIB as well as its sales offices across the UAE. The product offers competitive rates and payment tenures for as long as 15 years. It also comes with additional features, such as zero processing fees, Skywards EIB credit card as a pre-approved facility and more.

tandard Chartered Bank launched an Arabic version of the Women in Business Resource Centre, an online tool designed to help women entrepreneurs, to start and grow their own businesses. In addition to Arabic, the Resource Centre is available in seven languages. It is hosted online and is accessible on the Standard Chartered website. Deanna Othman, general manager premium banking and head of diversity and inclusion, Standard Chartered UAE, said: “The launch of the Arabic version of the Women in Business Resource Centre reflects our commitment to encourage and develop the skills of women entrepreneurs locally, regionally and globally.”

Deanna Othman, general manager premium banking and head of diversity and inclusion, Standard Chartered UAE

Dubai exports help boosts SMEs

ICT market recovery gathers pace: IDC

he Middle East’s information and communication technology (ICT) markets is set to accelerate faster than previously expected in 2011, with Saudi Arabia, the UAE and Qatar leading the way, according to the latest forecasts from International Data Corporation, the global market intelligence and advisory firm for the ICT industries. Hosting a panel of ICT experts from IBM, Intel, EMC, APC by Schneider Electric, Microsoft, Kaspersky Lab, and Hewlett Packard (HP) in Dubai, the international research firm revealed that IT spending across the Middle East will surge over 10 per cent year on year in 2011, driven by increased investments in the public sector, a resurgence in consumer sentiment, and a stronger focus on driving efficiencies within the enterprise.

ew months after the launch of the Export Assistance Programme (EAP), various Dubai-based SMEs from the food and beverage industry are utilising its financial support to increase their export promotion activities with the objectives of entering new markets and growing exports. The EAP is being offered by Dubai Exports, an agency of the Dubai Department of Economic Development. “As a service that is first of its kind in the GCC region, the EAP is beneficial

to our companies as they conduct marketing activities that will enhance their export capabilities. Following its successful launch, we have admitted many privately owned establishments from several sectors to the EAP, which demonstrates that SMEs based in Dubai are interested in seeking to export their goods and services of UAE origin. Arab Beverages Est. is a perfect example and we are proud to support its export effort,” said Engineer Saed Al Awadi, chief executive officer, Dubai Exports

Abu Dhabi National Hotels announces new appointments

he ordinary general assembly of Abu Dhabi National Hotels (ADNH) was headed by Salem Mohammad Athaith Al Ameri, the newly appointed chairman of ADNH, and attended by board members and senior management from ADNH Group and its shareholders. Held in Ritz-Carlton Abu Dhabi, Grand Canal, earlier this month, the meeting announced the appointment of Abdulrahman Hader Al Mureikhi and the re-appointment of Hamad Abdullah Al Shamsi as board members of the company. The year 2010 was a good year for ADNH as the company’s total revenues reached AED1.75 billion. Net profits rose to AED304 million.

❘ Business News

Local Updates Companies need to invest in indirect procurement

he Indirect Procurement Study (IPS) that focuses on the key developments in indirect procurement showed that categories like IT, marketing and advertising, facilities management, maintenance repair order, logistics and professional services have become important to chief procurement officers and their organisations, according to consulting firm A.T Kearney. “Given the fact that in the Middle East companies have grown very fast without a Frank Thewihsen, VP, A.T. strong focus on procurement, the potential value Kearney procurement and in terms of savings and value improvements in analytic solutions the region is much higher than in the rest of the world,” said Frank Thewihsen, vice president, A.T. Kearney Procurement and Analytic Solutions.

Toyota launches new finance package

Dubai Islamic Bank honoured Dubai Islamic Bank (DIB) announced that it has been honoured with the Islamic Finance News Award for Best Mudarabah Deal of the Year in 2010. DIB was honoured for its role in arranging an AED1.10 billion syndicated Mudarabah facility for ENOC Supply and Trading LLC, as initial mandated lead arranger and structuring bank. Mudarabah is a contract that arranges cooperation in a business investment between capital on one hand and entrepreneurship on the other, whereby the contracting parities jointly and commonly own the realised profit as per the agreement. DIB arranged the structuring and full documentation of the transaction to support the growing working capital requirements of ENOC.

Emirates Steel to expand

mirates Steel has commissioned Phase 2A of its expansion programme, 33 months after the launch of its construction activities. Phase 2B will be commissioned by the end of the year, the steelmaker announced.

l-Futtaim Motors has launched a new finance package named Toyota Choices. This new finance package will make it easier for UAE motorists to purchase the new vehicle of their choice. Toyota Choices provides customers with a low cost alternative to traditional purchasing methods. Simon Monahan, general manager Toyota Retail at Al-Futtaim Motors, stated: “Toyota Choices gives the customer real immediate benefits, such as lower down payment, lower

monthly payments and a shorter loan agreement. You can even upgrade to a brand new Toyota every two years because we guarantee the future trade-in value of your car.” Monahan continued: “Toyota Choices takes the worry out of owning a vehicle. The guaranteed minimum future value of the vehicle gives you the financial security of knowing that the car you own has a guaranteed resale value, which will not change over the period of the finance agreement.”

Emirates Steel’s Phase 2A, which consists of a 1.6 million MTPA Direct Reduction Plant (DRP) and a 1.4 million MTPA Steel Making Plant (SMP), has significantly increased the company’s DRI (Direct Reduced Iron) capacity to 3.2 million MTPA and steelmaking capacity to 2.8 million MTPA. This elevated Emirates Steel into one of the largest DRI producers in the Middle East region. The plant’s new facilities together with its planned further expansions will see Emirates Steel increase its production to around 6.5 million tonnes per annum within the next four years.

Business News ❘

Local Updates Investors double equities

ndividual investors on NASDAQ Dubai more than doubled their share of equities traded value on the exchange to 7.4 per cent to reach US$202 million (insitutions and individuals) in the first quarter of 2011, up from 2.7 per cent in the fourth quarter of 2010. The strong increase came after NASDAQ Dubai started routing all its equities trades through the trading platform of Dubai Financial Market (DFM) in July 2010, in order to improve access by individual investors. Jeff Singer, chief executive of NASDAQ Dubai, said, “We are delighted that the outsourcing to DFM’s systems has succeeded in attracting growing interest from individual investors in NASDAQ Dubai equities. Investors can now trade on both markets using the same investor number. We look forward to building further retail and institutional liquidity as confidence in the region’s capital markets increases.”

Abu Dhabi trade show

he food and beverage service industry of the region will have its own showcase in the nation’s capital this year when Abu Dhabi hosts Gulf à la Carte from November 21 to 23 at Abu Dhabi National Exhibition Centre. The three-day event is being organised by Turret Media, in cooperation with the Abu Dhabi Food Control Authority. Co-located with SIAL Middle East 2011, the show is dedicated to the needs of front-of-house management across all sectors of the food and beverage service industry and will include all operational aspects through three featured zones: technology, equipment and design. Maggie Moore, event director of Gulf à la Carte said: “Gulf à la Carte will provide food service operators and suppliers, from the region and the world, an unrivalled opportunity to identify latest business solutions and trends and network with commercial contacts in the industry. Industry professionals involved in creating and managing restaurants, clubs and cafes will now have a professional business platform to add value to their business.” The UAE currently hosts 11,000 stand alone restaurants. This figure is likely to increase by approximately 500 per year.

MENA’s franchising industry estimated at US$30 bn

he Middle East and North Africa (MENA) franchise industry is worth an estimated US$30 billion, affirms International ExpoConsults (IEC), organisers of the Franchising Middle East (FME) exhibition. The Middle East’s franchising sector is also diversifying into new business fields, with a distinct shift away from food and beverage brands. IEC has seen a shift away from fast food and catering brands and an emergence of new retail and service providers. Dubai-based international franchise marketing and consultancy firm FranExcel is also organising the third annual World Franchise Forum to complement this year’s FME exhibition. The theme for this year’s World Franchise Forum is ‘Master

Franchising’. The forum features a world-class speaker line-up including franchise company CEOs, as well as interactive sessions to cater to all levels of experience in the franchise industry, including theory, practice and legal overview.

Chevrolet’s best first quarter

hevrolet sold 1.1 million vehicles worldwide in the first three months of 2011, a 15 per cent increase over the first quarter of 2010 and the brand’s best first-quarter results ever. “This is a great way to kick off Chevrolet’s Centennial year,” said Joel Ewanick, GM global chief marketing officer. “Our first quarter results are a clear indication that consumers are responding to our new product line, which only happens when you truly listen to the customer… we look forward to strengthening those connections as we introduce Chevrolet to Korea, and as we introduce a growing lineup of global vehicles that build on the

successful launch of the Chevrolet Cruze.” Last year, Chevrolet was the only top-five global vehicle brand to grow total market share – accounting for about 5.8 percent of all vehicles sold worldwide while selling 21,596 vehicles in the Middle East.

Abu Dhabi real estate enters new phase

bu Dhabi’s real estate market is entering a new phase marked by enhanced supply quality and increasingly value-conscious demand. Meanwhile, improved affordability will encourage business and employment growth, according to the latest city profile by Jones LaSalle MENA. By the end of 2013, total office supply is expected to increase to 3.5

million square metres, with a number of major projects due for delivery by the end of this year. As far as residential space is concerned, the year 2011 will be marked by improved affordability as supply of high-end apartments increases, pushing rents down. The scale of new retail supply will increase market competition and soften rents, according to the Jones LaSalle MENA profile.

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Industry insight ❘

Ranking the SMEs Dubai SME 100 is a tool to identify inspiring SMEs within the sector, reports Sandhya Divakaran.

ubai SME, an agency under the Dubai Department of Economic Development (DED), has launched a ranking system for small and medium enterprises to give a further fillip to the fast growing SME industry in the country.

Called the Dubai SME 100, it is the first ever ranking initiative of Dubai’s top performing SMEs, and is aimed at encouraging enterprises that will add value to the emirate’s economy. Focusing on financial and nonfinancial parameters, the ranking will be a trusted tool to help SMEs identify scope for improvement, as well as increase their marketability in terms of regional and international investment. The organisation aims to keep a balanced approach to rank enterprises, using a number of financial and non-financial parameters. The financial dimensions include growth performance and financial soundness; while the nonfinancial ones focus on innovation, human capital development, international orientation and corporate excellence. The companies applying towards the ranking system will have to fulfill a few basic eligibility criteria, including being defined as a registered, legal entity engaged in economic activity for a minimum period of three years, with a turnover and headcount as per the standard requirements set by Dubai SME, in its corresponding industry. The results of the ranking will be published in October this year, followed by a ceremony to award top achievers.

The launch event of the Dubai SME 100 was attended by many industry leaders in the emirate. Sheikh Ahmed bin Saeed Al Maktoum, chairman of the Dubai Economic Sector Committee, president of the Department of Civil Aviation and CEO and chairman of Emirates Group, said the Dubai SME 100 was a bold initiative that would serve as the foundation of other initiatives, such as the possible development of an SME Secondary IPO Market Listing, and the building of an equity market dedicated to SMEs. Sultan bin Saeed Al Mansoori, the UAE’s minister of economy, spoke on the occasion, emphasising the need to focus on strategic priorities to develop the SME sector and enhance its competitiveness. He said the move to increase the corpus of the Khalifa Fund for Enterprise Development to AED2 billion should encourage and aid national entrepreneurs in the country in their business endeavours. He also said the UAE has succeeded in signing MoUs with Germany and South Korea to provide the SME sector with strategic advantages. Abdul Baset Al Janahi, CEO of Dubai SME, described the rankings as a logical evolution in Dubai SME’s efforts over the last eight years. It

will serve as a catalyst for developing entrepreneurship and SMEs in the country, he added. The launch was followed by presentations from Dr. Nasser Saidi, chief economist of the Dubai International Financial Centre, Vanessa Abernethy, acting head of Listing, NASDAQ Dubai, Tom Speechley, senior partner, Abraaj Capital, Rajesh Mirchandani, managing director, Dun and Bradstreet South Asia Middle East Ltd, and Nick Nadal, director, Hawkamah Institute for Corporate Governance. There was a consensus among the speakers that the country’s SME sector needs significant improvement. Among the various lacking, they highlighted the SMEs’ limited access to long-term capital. “There is a need for an exclusive equity market for SMEs,” urged Saidi, while Mirchandani stressed the need for an active credit bureau. The UAE’s SME industry is relatively unproductive. The segment contributes only 30 per cent contribution towards the country’s GDP despite accounting for 70 per cent of the total workforce in the UAE, noted. Speechley.

Timeline

Step 1: Application process (online submissions) begins in March 2011. Step 2: Filtering and evaluation over six months, including site visit and final interview. Step 3: Final results in October, with award ceremony.

❘ Industry insight

A “culture of transparency” The Intelligent SME (TIS) got an opportunity to interview Abdul Baset Al Janahi (ABJ), CEO of Dubai SME, on the various nuances of the Dubai SME 100 ranking initiative. TIS: How will the information collected from the SME 100 ranking be relevant to credit agencies and banks? ABJ: Currently, business and enterprise information needs to be improved, especially since the financial crisis. Transparency and corporate governance has become crucial in a country’s economic competitiveness. SME 100 companies will need to show their financial performance and records to participate in the evaluation and ranking process. Obviously, credit rating agencies and banks stand to benefit if more SMEs come forward to embrace proper accounting standards. The SME 100 initiative aims to create a culture of transparency amongst SMEs which will certainly be good for Dubai’s corporate sector moving forward. TIS: What measures will be taken to sustain support for those SMEs listed in the SME 100 ranking? ABJ: The SME 100 initiative is a journey for Dubai’s SME sector to learn, improve and develop. SMEs ranked will not only be given privileged access to government and banking packages, but will be encouraged to share success stories with other aspiring SMEs. Hence, to sustain the momentum, Dubai SME and its partners will organise numerous best practice sessions for the top ranked SMEs to share their success stories. Ranked SMEs will also be given platforms to network with interested private equity investors in Dubai, the region and globally. TIS: In addition to recognising the top performing Dubai-based SMEs, the listing also seeks to increase

the companies’ attractiveness in Abdul Baset Al Janahi CEO of Dubai SME the international markets. What kind of tie-ups are in place to attract ABJ: Increasin g the funding of foreign investors to SME 100 ranked Sheikh Khalifa Fund is a great companies? initiative that reflects the commitment ABJ: Dubai SME 100 companies of the UAE leadership to support will certainly attract global attention entrepreneurship. This initiative will from investors, multinational help the Khalifa Fund (KF) to extend companies, international business its services to those emirates that do bodies and the banking and financial not have entrepreneurship support institutions. Once we have the 100 programs, and ensure that our local SMEs ranked and published, Dubai entrepreneurs have access to the SME will use it to secure links with same services all around the UAE. as many stakeholders to provide For the other emirates, the existing networks and resources for these programs including KF, DUBAI SME, SMEs to access and eventually seek Ruwad in Sharjah, Saud Bin Saqr fruitful partnerships, be it financial programme in Ras Al Khaimah, and resources, markets and management Saud Bin Rashid programme in expertise. Umm Al Quwain are already working together through the UAE SME TIS: The government has been Network. highlighting the effectiveness of a modern and competitive law. When TIS: What should be done to are these laws set to come into increase the contribution of SMEs to place? Also, what laws currently the GDP? Currently it is only 40 per safeguard the sustenance of SMEs? cent. What are the measures taken to ABJ: The federal ministry of increase this percentage? economy is enacting a federal SME ABJ: To increase the share of SME law that will help SMEs access key contribution to any economy is resources and financing at various a long-term effort, and long-term stages of their growth. Under the policies must be put in place to make Dubai SME mandate, locally-owned it happen. The growth of the SME SMEs have access to government sector must be in tandem with the procurement contracts under the overall economy, in addition to the GPP (Government Procurement relative share. What the government Programme) run by Dubai SME. can do is to make the business It has served us well, as many environment conducive for business SMEs have grown sustainably and start-ups and growing SMEs. The improved their operations and government can also foster a proservices to the government and entrepreneurial culture amongst government-linked companies. Under its residents, especially those in the Federal SME law, the programme schools to understand the risks could be extended to all UAE-owned and rewards of entrepreneurship. SMEs. Finally, the government can and must continue to work with the banking TIS: With regard to the increased and financing community to ensure funding in the Sheikh Khalifa Fund, access to finance for deserving what is your opinion of this initiative? SMEs.

Industry insight ❘

Enabling SMEs, the way forward Alexandar Williams explains the importance of an organization such as Dubai SME in facilitating SMEs.

ike all economies, Dubai’s SME sector is a source of innovation and entrepreneurship, a major supplier to all large industry players, and the chief employer in the economy. This sector comprises 95 per cent of the enterprise population of UAE, 42 per cent of the workforce and contributes 40 per cent of annual gross value. It provides the stability to our country’s long-term social and economic development. The importance of the SMEs in any economy, globally, is such that it makes it impossible for any government to ignore this sector. Governments across the world spend significant resources to constantly re-create and improve the conditions for entrepreneurs and SMEs. On a selective basis, many governments promote and groom top SMEs by recognising their performance and contribution towards new value addition, while also facilitating their access to new markets. Many governments have facilitated and actively supported their homegrown SMEs to become multinational, global companies. The Dubai government, through the Dubai SME Agency, started the programme of supporting local entrepreneurs in 2002. To date, it has successfully facilitated the creation of some 5,000 start-ups and SMEs. These new businesses have created jobs, added new products and services to the Dubai and UAE markets, and have emerged as major suppliers to the public and private sectors. Some have even successfully internationalized, flying the UAE flag high in overseas markets.

Mandate In 2009, Dubai’s Executive Council mandated that the Mohammed Bin Rashid Establishment be the agency in charge of developing the SME sector of Dubai. In simple terms, it means that the Establishment’s role is now defined more in economic terms, to focus and create new value for the Dubai economy. Its scope covers all SME customers, as defined by the new SME definition of Dubai.

The focus will be on supporting and developing “knowledge-based and innovation–based” SMEs in whatever industries that can add value to Dubai’s economy. Aspects that will be preferred include creativity, design, new business models and Intellectual Property (IP) as the strategic assets of SMEs. 3-Pronged Strategy for SME Development. To develop the Dubai SME Sector, the agency has developed a 3pronged strategy as follows: • Advocate for a pro-SME business enabling environment • Seed a pipeline of innovative start-ups • Grooming promising SMEs (Figure:1)

Vision and mission The vision of Dubai SME is to make Dubai the centre of innovative SMEs that can create new value for the Dubai economy. Being a global city, Dubai must continue to embrace and enhance its position as an entrepreneurial and SME hub where ideas, talents and innovation drive the growth of the economy. Dubai SME’s mission will therefore cover two key aspects - fostering an entrepreneurial culture amongst its residents and ensuring a competitive SME sector that is globally strong.

Under the first strategy, Dubai SME will actively engage key government stakeholders with regulatory roles to adopt a pro-SME mindset. It will organise policy dialogues at the emirate and federal levels to engage

DUBAI SME’s Vision, Mission & Roles

Vision

Dubai as a Global Centre for Innovative SMEs

Groom Seed Advocate

Roles Mission Foster the development of a flourishing entrepreneurial culture and a competitive SMEs sector to support Dubai’s economic development goals

Enterpreneurship Development

SMEs Development (Groom Dubai’s Top SMEs)

Focus on Policy Advocacy, Intellectual Property, Innovation, Technology & Design oriented business

❘ Industry insight

Summary of Key SME Initiatives SME Development Needs Survey SME ICT Package

SME Industry Studies

Asset Register

Size

ra du at io n Th

VC Fund

re sh ol

IP & Innovation Development Initiatives

Idea Idea Lab Lab

Dubai SME 100

SME Insurance Package

Entrepass Entrepass Scheme Scheme

SME Friendliness Index

Company Reporting Standards

Medium

Seed Fund

SME SME Secondary Secondary Market Market

Small

Micro

Credit Credit Guarantee Guarantee Scheme Scheme

Pipeline Time

stakeholders on topical policy issues such as starting a business, growing and closing a business. In addition, it will work with the banking and finance sector to push for a favourable regime that enhances SMEs’ access to finance. It will also advocate and work with the banking and finance community to develop innovative enterprise financing options for all stages of enterprise growth. In essence, this strategy aims to create a pro-SME business enabling environment for all businesses at different stages of their lifecycles. Under the second strategy, Dubai SME will actively seed start-ups based on its current entrepreneurial development programmes such as incubation, quick start, business planning and advisories, capability and enabling programmes and debt financing for selected start-ups via a limited credit guarantee programme. Other services include access to the Agency’s Government Procurement Programme, which mandates that all government and related entities must set aside five per cent of their annual procurement value to local SME members.

Under the third strategy, Dubai SME will play a promoting and enabling role to groom growing SMEs that have the potential to contribute significantly to the Dubai economy. A flagship initiative to support this strategy is the Dubai SME 100, recently launched. Dubai SME 100 aims to recognise top performing SMEs in Dubai that have the potential to grow large and eventually have a global footprint. At a more explicit level, Dubai SME 100 aims to create a pipeline of top SMEs that can serve as a feedstock to the proposed equity market for SMEs. This will create interest among private equity investors who are looking for good deals in the market to invest in growing SMEs that are willing to be offered in a publicly-traded platform, such as NASDAQ Dubai/DIFC SME Equity market. Broad-based and grooming initiatives for SMEs: Dubai SME has activated or has in the pipeline a number of broad-based and grooming initiatives, including the promotion of intellectual property, innovation and corporate governance initiatives for the SME sector.

Promoting proper company reporting standards, encouraging SMEs to explore new international markets and a professionalisation programme (leadership, branding and management development) that increases their capacity and capabilities to grow over the longterm will be explored and launched in the future. The full suite of initiatives over the next few years can be summarised in figure 2.

Alexandar Williams is the director, strategy and policy with Dubai SME. He has over 20 years’ experience in strategy and policy planning for SME sectors of various countries. He has an MSc in Public Administration from the London School of Economics and Political Science.

Industry insight ❘

Guiding SMEs to success The SME Evolution Programme offers nonfinancial support for start-ups and growing businesses, TIS reports.

any a time it has been highlighted that SMEs need continuous support financially and non-financially to keep their business on an even keel, while charting a stable path of growth. But then, how does an SME make sure that a programme offered for non-financial growth is tailor-made for its needs? Potential’s SME Evolution Programme has an answer to the above question, as it combines knowledge, convenience and affordability. The programme is a blended approach, using different media to educate and inform business owners. “Most successful companies reach a point where, despite their ambition to expand, do not know how to get going,” says Shadi Banna, managing partner at Potential. Potential is the answer to this roadblock to success, he adds. During the past five years Potential, a Dubai-based consultancy, has helped dozens of entrepreneurs to start-up their companies and has supported hundreds of SMEs to expand their business. The programme took six years to chart out, and is now being executed. It is a six-month programme that includes over 50 webinars over three months with practical exercises, discussions and other non-financial support to small and medium enterprises. Four webinars of this kind have been held so far, the first being a preliminary session, which introduced the programme’s online system and its basic features,

such as teaching participants how to ask questions and interact with a presenter. The subsequent webinars have dealt with identifying unique value propositions of SMEs; demonstrating keys to successful collaboration, including showing techniques and tools for effective collaboration and using virtual office. These also focused on selling skills, which help companies turn features and specifications into benefits for their clients to sell well. The content of each webinar has been designed to give effective and practical guidance. “The key to this programme’s popularity is its convenience. Participants can login at a convenient time ... we have had 150 companies registered with us so far, and still counting; we monitor the progress of each participant,” explains Banna. Potential’s webinar follows a schedule – first a lecture is held by a presenter, then a case study is introduced, after which, participants are asked to complete a certain exercise, and it ends with a talk by a guest speaker. Participants are encouraged to interact as they see best, so as to facilitate an insightful exchange. This is meticulously done in an hour’s time. Speakers include 30 presenters from Potential and 30 guests. Currently catering to businesses in UAE, Lebanon and Qatar, the SME Evolution programme is looking to spread across the Middle East. Potential is also firm in advising clients that this programme is not

for those companies that expect additional services to be undertaken by the Potential staff to access finance. At the end of the training, five worthy companies will be selected to join Arabia 500, a regional competition that recognizes and rewards the top performing small and medium enterprises. These companies will then be invited to workshops in Harvard where they will meet their peers in a great networking opportunity.

Shadi Banna, partner at Potential

There are other initiatives in the pipeline with Potential. “The launch of social networking on the Potential website is just one step in the agenda,” says Banna. The SME Evolution Programme is definitely one initiative to keep track of.

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CNG - converted cars soon a reality The UAE is slowly veering towards eco-friendly cars that will reduce carbon emissions by 70 per cent, explains Stephanie Dechamps.

n February 9, 2011, the parking lot in front of the Dubai Municipality office in Diera looked unusually desolate, as more than 2,500 public sector employees from the Dubai Land Department, Etisalat offices and Dubai Chamber of Commerce answered the call for a day free of cars in the emirate. This was the second consecutive year that they had left their cars at home, commuting to their offices on public transport, on the “Dubai Car Free Day.” Organised by the Dubai Municipality, this initiative, last year, had saved three tonnes of carbon dioxide emission, notes Engineer Hussain Nasser Lootah, the Director General of Dubai Municipality, who strongly advocates fewer cars on the road to reduce air pollution.

Yousif Saeed Lootah director SS Lootah Group

Environmental awareness is new to Dubai, but it is, today, intrinsic to the emirate’s 2020 vision of sustainable development. The success of the Car Free Day initiative is an indication of the dogged focus of the government to educate the residents in the country of the importance of a green environment. The marketing and PR around the event was well conceived, as the ceremony included an eco-friendly car

show and the display of a bio-diesel project. Engaging the private sector One of the major achievements of the government in its endeavours at green and sustainable development in the UAE has been the involvement of the private sector. One such major player is the S.S. Lootah Group, which is involved in a bio-diesel project for heavy trucks. The group, a pioneer in the green initiative in the UAE, is setting up to run its own fleet of trucks with bio-diesel. Of course, the likes of the SS Lootah Group is not common in the Gulf. So, there is a heavy responsibility on those few that have understood the importance of green living and taken the lead to help the authorities to bring about a change in the mindset of their peers by not only introducing new, green technology in the region, but also by showing how useful these are for enhancing the bottom line over a period of time. The Lootah group first started toying with the idea of green vehicles in the early part of the last decade, conceiving a ‘Green Car’ Programme in 2005. The objective of the programme was to address mobility needs of people with a minimum impact on the environment. Much progress has been made since then, and the group currently has 90 vehicles that run on compressed natural gas, electricity or are hybrid cars. The idea of bio-fuel was the brainchild of Yousif Saeed Lootah,

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the director of the Dubai-based S S Lootah Group, who wanted to go a step further with the group’s green programme. He asked the group’s research team to develop bio-fuel. They responded by recycling used cooking oil to make bio-diesel. Lootah claims that there are two basic advantages of using biodiesel. Firstly, it could recycle an estimated one thousand tonnes of used oil that end up as garbage in Dubai productively, converting it to bio-diesel. “We manage a waste that otherwise has negligible value in comparison to palm oil, which has its prime value as oil than as a feedstock,” he explains. Secondly, bio-diesel (B5) does not require any engine modification if it replaces up to five per cent of conventional diesel. Besides, the B5 mix reduces carbon dioxide emissions by 2.5 percent. Usually bio-diesel produces half the emissions of conventional diesel and 10 per cent less particulates.

Picture courtesy Nissan Middle East

The S.S. Lootah group does not have to worry about its first client, as 15 of its own 86 group companies are potential users of bio-diesel. Demand is not an issue, but the challenge for bio-diesel is to scale up the first

project and enhance the cooking oil collection process, says Lootah. Other green initiatives One of the other potentially significantly important initiatives by the Dubai Municipality, in reducing vehicular pollution in the country is of driving cars using Compressed Natural Gas (CNG). CNG-converted vehicles reduce carbon emissions by 70 per cent. Until now, only five Dubai Municipality cars have been kitted out with CNG engines. If the trial is successful on these five vehicles, it is expected that nearly 500 vehicles will be converted by the end of the second phase. Hussain Nasser Lootah, the director general of Dubai Municipality estimates fuel savings of approximately AED2.3 million a year for 400 converted vehicles. Some of the other emirates in the UAE have also made a strong statement in this regard. Says Hesham Ali Mustafa, the general manager of Emirates Gas: “In total, 450 vehicles have so far been converted to CNG in the UAE, of which 300 belongs to the Sharjah Electricity and Water Authority. The Abu Dhabi National Oil Company has also been a pioneer in this regard, converting 150 vehicles to run on

CNG engines in Abu Dhabi: most of these vehicles are taxis.” CNG is 30 per cent cheaper than conventional fuel and, competitive in terms of mileage. Distribution, however, continues to be a major challenge for CNG in the country with few petrol stations being equipped with the facility. Steps are now being taken to get the distribution strategy in place. At the end of February, this year, Emirates Gas, a subsidiary of Emirates National Oil Company, announced its plans to supply more than 11,000 cubic metre of natural gas every day for vehicles To start with, two mother-stations will be located at two ends of the city and connected to an existing natural gas pipeline. In total, 15 CNG refuelling stations are planned to be set up over the next five years.

“The first filling station in Dubai should be operational in the last quarter of 2011,” Hesham Ali Mustafa General Manager Emirates Gas.

One of the other areas that are demanding attention is the conversion into CNG engine itself. The local market has not been

“Nissan Leaf” 100% electric car

Picture courtesy General Motors Middle East

❘ Industry insight

Chevrolet Volt 100% electric car proactive to say the least. Despite a few car manufacturers having already developed gas vehicles (Honda, Mercedes, Volvo or Fiat), local dealers are reluctant to sell these models in the UAE. The alternative of converting a normal car into a CNG-run vehicle is not cheap, costing between AED5,000 and AED10,000. It will take some time to get this issue sorted out, note experts, as in a market economy, ultimately the best proposition comes out the winner. “Statistics have shown that there are more than 11 million natural gas-run vehicles globally and over 17,500 refuelling stations worldwide, proving that CNG is fast becoming the preferred choice as an alternative fuel. The reason being it is cheaper and conversion kits are available. It also gives efficient mileage, longer engine life and produces lesser carbon emissions, resulting in less environmental pollution. These attributes make CNG the best available option in Dubai for a green and sustainable solution,” explains Mustafa. Significantly, other green options are also being tested in the UAE and elsewhere in the region, including the electric or hybrid car. The SS Lootah group was the first to introduce an electric car in the Gulf region in 2008. This option is the most tested

worldwide. In 2010, the launch of two electric cars showed the international interest for this technology. Nissan launched the “Leaf” and General Motors did the same with the “Volt.” Globally, the year 2011 will be a test for the commercial viability of these new electric vehicles that are already in the market. There is an uncertainty about price sensitivity, charging station networks, the length of time required to charge electric vehicles, and other important matters, according to experts. The UAE is no different from the global experience as supply and the distribution network continue to be an area of challenge. There are not enough places to recharge an electric car on the road in the UAE. An electric car cannot cover long distances on one charge. The Gulf is probably not the best place for electric cars. Early Days But these are still very early days in the journey of the green city initiative. One will have to find out, by trial and error what will work best over the years. Coming back to Dubai Municipality’s inspirational Car Free Day, one has to say that the lead has been taken by the authority responsible to make a change in the quality of the environment in

the country. The effort needs to be sustained and we need a next initiative, something in addition to a Car Free Day to involve more people in the community in the green initiative. Currently, there are more than one million cars plying on the roads of Dubai. The Environment Department of the Municipality estimates that these cars emit 23,300 tonnes of carbon dioxide every day. On a Gulf scale, it is even more significant. An eco-friendly car engine will not only help to reduce the carbon footprint, but also save money for users. However, not much will change on the roads if the mindset in the country, where the price of fuel is insignificant, does not change. The Dubai Municipality understands that it is a long haul, as such changes in the way of lives of people do not happen overnight. But a successful beginning has been made, and there is a lot of optimism around these green initiatives. There is more confidence now that our roads will look different and so will our health, as the quality of air become better with more green cars replacing the conventional ones in future. Keep your ears on the ground for the next big green initiative from civic bodies in the country. The journey has only begun.

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SME finance now a reality SMEs will have more financing options, as more banks come up with new lending solutions for the segment, TIS reports.

he UAE ministry of economy has finally come out with a proposed SME law. The proposed draft law has been submitted to the ministry of justice for review, and is expected to be finalised by June, this year. The drafting of the new SME law is a major development in a country where SMEs, despite being a vital part of the engine of economic growth, has been neglected for a long time. The new law, when put in place will not only ensure further economic diversification in the UAE, but also encourage larger numbers of new entrants into the country’s job market. The UAE’s strategic priority The UAE’s leadership has recognised the strategically important role SMEs play in maintaining stability in the job market and the economy itself. The UAE’s minister of economy Sultan bin Saeed Al Mansouri has said that the UAE’s strategic priority lies in enabling local SME establishments and programmes to achieve greater success. He has emphasised time and again the need for training, innovation, marketing and most importantly, financing to boost the SME sector. “The country’s SME sector needs strategic partnership with governmental departments and the private sector,” notes Al Mansouri. And, this is exactly what the ministry of economy and all those different parts of the UAE’s government machinery are driving at.

Significantly, the efforts undertaken by governments and different agencies at various levels, including economic departments and chambers of commerce to strengthen the SME sector has, already started to bear fruits. Today, banks are beginning to lend to this sector, although there are major obstacles that need to be overcome. Experts point out that lending to SMEs is not as simple as lending to organized large businesses, primarily because assessing credit issues for smaller companies is not always easy. This is one of the reasons why most SMEs continue to be rebuffed even after the opening up of the banking industry to this segment. However, consultants advising the industry agree that most of the banks’ reluctance to lend to SMEs will vanish once a national-level credit bureau is established in the country. They argue that a national credit bureau will help both lenders and borrowers to settle down and focus on business and growth of the sector. A credit bureau will make banks and financial institutions more confident lenders, as they will have access to complete information and transparent data pertaining to the financial situation of a borrower and their payment behaviour; for the latter, their cost of capital will fall dramatically. The current scenario In the recent years, banks in the UAE have taken a number of measures to facilitate SME loans, including lowering the minimum capital

requirement effectively to zero level, thus allowing businesses to start up with less initial capital. This has been possible, primarily due to the move by the authorities to increasingly create a more conducive environment for the SME sector in the country. Says Ashok Gupta, CEO of Bank of Baroda: “We feel that the Dubai Department of Economic Development has undertaken major supportive measures to improve bank lending to SMEs in the country. The segment-wise definitions of SMEs, such as trading, manufacturing and services, have been announced, helping the cause. Also, the defining of micro, small and medium enterprises based on the number of employees and turnover is a welcome development, as it will bring more units under the SME segment.” Business owners of small and medium companies, however, continue to complain about their inability to get adequate financing from banks. They grumble that even when they manage to get funding, interest rates are prohibitive and a big dampener that deters them from persuading expansion. The typical 20 per cent interest rate levied on unsecured loans is twice that of the prevailing interest rate in other developed countries in Western Europe, they protest. Not surprisingly, a study conducted by the Union of Arab Banks has showed that regional SMEs receive

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only eight per cent of total loans from banks. Bankers attribute the exceptionally high interest rates charged on unsecured business loans in the UAE to the significant risk premium such loans command. There are two major areas of risks while lending to SMEs, they explain, and these are: a difficulty in assessing the credit quality of businesses in a data deficient market like the UAE and; the informal and unorganised business culture practised in the country, resulting in incomplete information, inadequate accounting and unreliable financial statements. Thus, some of the most common reservations banks raise while negotiating a loan for an SME invariably includes insufficient documentation, apart from a shorter duration of the company’s existence, and unsound fundamentals of the business itself amongst others. Bankers point out that they are more comfortable in lending to SMEs which are in business for an acceptable period of time, usually between one and three years. Availability of audited financial statements for that period, bank statements in the case of smaller companies to see their cash flows over the period, are also important. Many banks specify a minimum monthly turnover of between AED100,000 and AED250,000 as part of the eligibility criteria. Osama Hamdani, the SME head of Ajman Bank, says that analysing the credit worthiness of a company is the most important task that a banker faces when he receives a loan request from an SME. “How long a company has been in business and the industry vertical that it operates in, are among some of the most important criteria that we look for while taking a decision on loan. The business model, banking relationship, history with other banks, and financial performance indicators are also as important,” he adds. According to Citibank - it focuses at innovative solutions for its clients through a combination of factors. “Our strategy towards the small and

Ashok Gupta (AG), CEO of Bank of Baroda (BOB) speaks to The Intelligent SME about the various measures adopted by Bank of Baroda to support SMEs. TIS: In your view, what are the supportive measures taken by the Dubai Department of Economic Development (DED) to improve SME bank lending conditions in the country? AG: We feel that DED has taken major supportive measures to improve SME bank lending in the country. Dubai SME 100 was launched on March 14. The identified top 100 SMEs will have benefits from the initiative, such as: privileged access to key government programmes, networking with government and banking sector, international market exposure by select government authorities, and VIP treatment at select government authorities. Definition according to segment of SMEs namely trading, manufacturing and services have been announced while delineating micro, small and medium enterprises based on the number of employees and turnover. The new broad based definition will bring larger number of units under the SME segment. TIS: What are the suggestions and opinions of your bank to reinforce growth in providing business loans to the SME segment? AG: We feel that SMEs form a very important and crucial sector in the area of banking. Their needs and requirements are special and we base our strategies on providing financial requirement in a reliable and flexible manner; servicing SMEs with a focused and specialised approach; meeting all kinds of banking and financial requirements by giving them umbrella type facilities; and considering an adequate moratorium period or repayment period, for project finance.

TIS: Explain in detail each of the services offered by BOB while catering for SME customers? Provide us the interest charged on each service offered and its value additions. AG: Targeting SMEs, BOB provides very specialised and focused services. The bank has established a specialised outfit called the SME Loan Factory. The SME Loan Factory works exactly on the principles of an assembly line in a factory, wherein, there is a fixed time limit to carry out each and every activity. All credit decisions at the bank are taken in a time bound manner for sanctions of credit facilities. Facilities up to AED3 million are provided immediately. Facilities ranging AED3-20 million takes around six working days (after receipt of full information/details) for approval. Apart from regular requirements such as working capital limits, term loans and demand loans, SME Loan Factory offers many innovative products, keeping in view the specific requirements of SMEs, such as line of credit, equipment finance or heavy vehicles, traders’ loan or super stores, project finance (industrial projects), express loan for traders, professionals, and business units.There are no fixed criteria for rate of interest and other terms of sanction for SMEs. It depends on the ratings of the SMEs which are arrived at after taking into account a number of parameters. TIS: How do you see competition within financial institutions offering various services to SMEs and what is BOB’s competitive edge? AG: Most of the banks are financing SMEs on the lines of normal financing to other segments, whereas BOB has established a specialised outfit – SME Loan Factory – as an exclusive outfit for meeting all kinds of banking and financial requirements of the bank. TIS: What is the ideal definition of an SME? AG: At present, units having annual turnover of AED100 million are classified as SME by us. It is difficult to specify the ideal definition; however, the classification mentioned above has stood us in good stead.

Continued on page 20

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medium to mid-market enterprises is helping us cater to their lending needs, and in enabling them to experience the power of a true ‘global bank’ through our cash and trade infrastructure,” says Satyajeet Roy, Citibank’s head of commercial banking. Access to capital vital With limited cash reserves and volatile cash flows, smaller businesses often depend on access to finance, not just for growth but for survival too. A recent study by Dun & Bradstreet (D&B) on the funding of the SME sector points out that banks with a strategic focus on SME market should try to tailor their credit and other banking products to suit this segment. D&B has also urged banks to reduce the complexities of the financial products they offer to the SMEs, by relaxing documentation procedures and appointing a dedicated relationship manager to specifically deal with small businesses. In a highly competitive market like UAE, a customer kept waiting for too long may well go elsewhere, as there are plenty of financial options available. SMEs have done well, and grown without banks’ financing support in the past. The establishment of a national credit bureau, and more open banks to lending and understanding small and medium enterprises are all good news, and has all the makings of creating a SME business revolution.

The success of Rakbank business finance lies in the bank’s collateral-free loans, which are offered based upon customers’ viable business model, strong business, and robust operating environment, measured through extensive customer site visits, claims Mirchandani. Pritam Mirchandani, head of business finance, gives an account of the financial solutions offered by RAKBANK, to The Intelligent SME. Rakbank is one of the most active banks offering financial solutions to the SME sector in the UAE. The bank has a dedicated business unit to service SME clients and offers loans and deposit services tailored to their requirements. Pritam Mirchandani, head of business finance at Rakbank, says that the bank defines the SME sector as business customers whose annual turnover reaches AED50 million. The bank has separate units that cater to the requirements of micro, small and medium sectors, ensuring that it offers customers various solutions throughout their business cycle. Rakbank’s outlook on the economy remains positive with the bank increasing its cap on collateral-free business loans to AED1 million. Recognising that SMEs are key contributors to the economy, the bank continues to be aligned with this sector.

Collateral-free loans give Rakbank a competitive edge in the market since the requirement of collateral is often a significant obstacle for enterprises in accessing finance. Rakbank offers flexible repayment periods of up to 60 months at affordable interest rates, with minimal documentation and quick approval processes, notes Mirchandani. Rakbank is constantly working to widen its branch network and has opened several branches over the last five years that are close to SME centres, including Sharjah Industrial Area, Bur Dubai, Mussafah, Al Quoz and, most recently, Dragon Mart. SME finance services are available at the bank’s 30 branches, including its eight dedicated SME centres located within business concentrations across the UAE. Mirchandani said that Rakbank is constantly introducing new, alternate channels that can facilitate a customer’s banking experience, such as online banking, Rakbankdirect.ae, and now mobile banking.

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Federal Credit Bureau to boost SME financing A credible credit information bureau will aid SMEs greatly, TIS reports.

he new federal law to create a national credit bureau in the next two-three months is a massive step towards informed lending in the country.

The new system is likely to make it mandatory for financial institutions to supply credit-related information of their customers to a central database. This move will help banks make prudent lending decisions, benefiting deserving enterprises, many of which, today, are suffering from the lack of financial support. Authorities in the UAE have been

trying to set up a credible and acceptable credit information bureau for a long time. Understandably, as with any new initiative of such importance, there have been hiccups.

“The federal credit bureau’s coming into force will strengthen the UAE’s credit reporting infrastructure.” Ali Ibrahim, deputy director general at DED, and managing director of Emcredit.

The first initiative of this kind began as early as 2006, when the Department of Economic Development, Dubai established Emcredit as the UAE’s first government-backed credit information services company, to offer credit reporting services in the UAE. But as an emirate-level institution, Emcredit was not recognised as a credible resource for institutions outside Dubai, which restricted its appeal to banks and other entities at the national level. With the federal credit bureau now in the offing, it

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is expected to command respect across the country, and will ensure better participation from banks and other institutions. Says Vikram Venkataraman, director of Salvus Strategic Advisors:”The benefits of a credit bureau are well known. With ‘skip’ risk high, given the predominance of expatriates in the customer base of all banks, the qualitative checks banks can and should carry out on borrowers (especially SMEs) are absolutely critical. If a credit bureau at least puts the basic financial exposure and risk information together, it would allow banks more time to do value deed checks and generally improve their turnaround response time to clients as well.” The new federal credit bureau will obtain comments and references from SME institutions and various chambers of commerce in the counry. It will involve data shared by banks, and cover both individual and corporate credit information services. These include creditors, employers, insurers, and government agencies reviewing a company’s status for licensing or benefit purposes, or any third party requesting a report. However, very few entrepreneurs know about or truly understand how business credit is established and tracked and how it affects their lives and businesses. Credit products The categories of credit products most commonly used by SME borrowers in the UAE are: • Letters of credit – A letter of credit guarantees payment by the issuing bank if certain conditions are met. • Overdrafts – Used by account holder for working capital • Performance bonds and guarantees are commonly used only in the construction sector. “The federal credit bureau’s coming into force will strengthen the UAE’s credit reporting infrastructure. Greater participation by banks will lead data coverage levels that will provide instant value through comprehensive credit reports,” says Ali Ibrahim, deputy director general at DED, and managing director of Emcredit.

service will give us an extra edge. Furthermore, strategic alliances with the right partners can also create a competitive edge by helping to promote our products and services.

The Intelligent SME (TIS) spoke to Osama Hamdani (OH), head of business banking, Ajman Bank on the subject of SME financing. TIS: In your opinion, what are the UAE government’s initiatives taken towards improving the bank’s lending to SME’s, especially with a credit bureau in place now? OH: The UAE government has always supported the SME sector and has identified it as an area for sustainable growth in the future. Currently, banks have differing definitions of SMEs. So, the government is working to define the sector. This will bring a much needed clarity to the definition of the segment. With the proposed federal credit bureau in place, banks in the country will have the proper tool to accurately assess the customer’s credit worthiness. TIS: What services do you offer to SME customers? OH: We offer end-to-end financing to our customers. This includes both short and long-term solutions, be it working capital/trade financing, commercial vehicle financing, commercial mortgage financing, business installment finance or transactional banking services. In addition, we have a dedicated relationship management team who are always available to serve our customers and to compliment our distribution network which has been chosen carefully to cater to this segment. TIS: Many financial institutions are offering various services to the SMEs. In what way Ajman Bank is different? OH: Banks have realised that more financing options should be available and, thus, they are offering multiproduct ranges to serve the needs of those companies. Ajman Bank has identified “Service” as the key differentiating factor. Excelling in

TIS: SME Financing is always a risky proposition; credit on risk versus risk on credit – how do you balance to remain consistent? OH: Entering into this segment has been a conscious decision by the bank’s management. Risk adjusted exposure and pricing are set for each customer. In addition, proper monitoring mechanism minimises the bank’s risk exposure during the financing life cycle of the customer. TIS: What are the minimum and maximum loan amount to this segment and their evaluating procedures? OH: The number of years of existence of the business and the business sector are the two main criteria we look for in a company. The business model, banking relationship, history with other banks, financial performance indicators are also very important. At the moment, the maximum and minimum finance amounts for Business Installment Finance stands at AED250,000 and AED750,000 respectively. In terms of trade, for commercial vehicle finance and commercial mortgage finance, the amounts range from AED150,000 to AED5 million. TIS: Your ideal SME definition, with respect to their turnover and head count? OH: Actually the SME segment should be defined based on their annual turnover. In my opinion, any business entity generating annual sales/turnover of up to AED150 million should be defined as an SME. However, they will fall under the medium segment. In the case of the small segment, annual turnover would be up to AED30 million. In terms of head count, depending on the business sector, the definition varies. The service sector will always have higher headcounts compared to other sectors. However, anything up to 250 should be considered as an SME.

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“Emcredit has so far invested in building a robust technical infrastructure, developing multiple value-added product, services and credit reporting skills,” he adds. It’s extremely important for businesses to meet all the requirements of the credit market in order to ensure a higher likelihood of credit approval. In fact, not being in compliance with the credit market can raise red flags with both credit bureaus and financial institutions. Credit bureaus rally round in a big way to create the most conducive environment for SME lending as they assist banks’ assessment of debtors to quantify the risk of lending in a more realistic manner. In the UAE, with the involvement of the governments across the various emirates, regulators, international experts and financial institutions, the federal credit bureau now is a reality. One can be now more confident that not before long an SME in the country will be regarded in the same way as any other large business in the credit market. An SME borrower’s loan application will not be rejected just because of its size, or on the pretext that the business not being backed by prominent names that bankers are so comfortable with.

November 2006: UAE’s first credit bureau Emcredit, is set up in Dubai. August 2007: Emcredit set to become federal credit bureau by ministerial decree. September 2008: Emcredit is recognised by the World Bank as instrumental in improving UAE’s position by 48 points in the area of credit information from 116th to 68th position. January 2009: Emcredit receives prestigious ISO 27001 information security certification. November 2009: Emcredit, Benefit Company (Bahrain), National Bureau of Commercial Information (Muscat)and Credit Chex (Pakistan) founded Middle East Credit Reporting Association (MECRA). May 2010: Ruler of Dubai, UAE Vice President and Prime Minister His Highness Sheikh Mohammed bin Rashid Al Maktoum issues decree No. 8 of 2010, which identifies the Emirates Credit Information Company (Emcredit) as the appointed body for providing credit information services in Dubai. UAE President Sheikh Khalifa bin Zayed, approves December 2010: creation of a federal credit bureau that will require banks to provide credit information about their clients. Set up of a federal law that could see the creation January 2011: of a national credit bureau within the first six months of the year.

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No more jail time for bounced cheques Gulf Finance opens its doors to SMEs with its new offering - SME Advance. A TIS report.

SMEs contribute significantly to the GDP of the UAE with their combined revenue pool of over $1.2 billion.

ulf Finance, a UAE-based boutique financial firm specializing in the small and medium enterprise (SME) market, has come up with a new and SME-friendly product called SME Advance, which targets nearly 230,000 such enterprises in the UAE. Bear in mind this is not just another financing product. It is different in that it tackles a very challenging issue that all borrowers face in the UAE: the prospects of spending time in jail in case of a bounced

repayment cheque. According to Gulf Finance, SME Advance provides local small businesses with a secure finance option. Designed to suit smaller companies, an application has to be supported with only basic financial and operational information. Applications can be submitted online to save time, says a senior executive of the company. Start-up businesses that may not have attained the desired level of cash flow can also avail of interest-only period options in addition to an extended tenure of up to five years. Unlike other traditional financing requirements, business assets or collateral are not mandatory for obtaining SME Advance. Furthermore, if a loan is to be paid back early, there is no early settlement fee, and the product has the flexibility to serve industry segments other than the SMEs. As part of its commitment to help the region build on its fundamentals and develop the capacity of its people and institutions, Gulf Finance

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supports many SMEs in the UAE through its various finance offerings, says Steve Williams, CEO of Gulf Finance. Over the last decade the company has provided a total of over AED2 billion in finance to the country’s small business market, claims Williams. SMEs contribute significantly to the GDP of the UAE with their combined revenue pool of over US$1.2 billion, which is growing annually by 25 per cent. With their inherent capacity to drive entrepreneurship, innovation and resource efficiency, SMEs are seen as resilient and easily adaptable business models in emerging and fast-growing economies worldwide, including the GCC. Over 90 per cent of the businesses in the GCC are SMEs and SME finance is also the fastest growing lending segment present today. However, a recent report by the Union of Arab Banks and the World Bank showed that Middle East-based SMEs currently receive a mere eight per cent of regional bank lending, and GCC-based SMEs receive just two per cent of all bank lending. And this is where firms like Gulf Finance and products like SME Advance have the potential of making a difference. Says Williams: “Research highlights the difficulties SMEs face in accessing capital. This problem is particularly acute in this region; the complexity of SME business models coupled with their limited track

records often resulting in variable lending appetite from mainstream financial institutions.”

“Some SMEs may fail, but their failure should not be compounded by jail time. Whilst, like any other lender, we expect our clients to repay their loan, we will not pursue criminal action if a cheque is bounced.” Steve Williams CEO of Gulf Finance

The CEO adds that the community should encourage those that take the tough decision to start up a small business. Whilst the rewards over time can be substantial, the risks, particularly in the early phases, are significant for SMEs, he explains. “The variable cash flows, the reduction in personal earnings, and the weight of responsibility - they all

add up. Alongside this is the very real risk of spending a period in jail if the business fails and is unable to meet its obligations,” Williams notes. He also reiterates that whilst many small businesses do succeed, there are those that fail by the way, but it is important that a culture of entrepreneurship is developed. SME Advance, aims to do exactly that, he adds. “At the heart of the SME Advance proposition is an explicit acknowledgment that some SMEs may fail and that this failure should not be compounded by jail time. Whilst, like any other lender, we expect our clients to repay their loan, we will not pursue criminal action if a cheque is bounced. The adult approach is to allow clients the opportunity to find employment and repay the loan over an agreed and manageable period. A more active market leads to higher growth and with that comes better earnings,” he says. Gulf Finance was declared the ‘Best Company in SME Finance’ in the Arabian Business Achievement Awards 2010. “Gulf Finance is excited to be named as the Best Company in SME Finance. It recognizes our focus on a forward-looking sector with enormous potential in the region and all over the world. SMEs are recognized as the growth engine that will lead global economic recovery,” said Williams.

Industry insight ❘

Small proposition – Big opportunity Packaged policies focused on individual SMEs are the answer to policy cover issues, emphasises Ludger Moreas.

business insurance for nearly every operation. A packaged policy can literally cost less than one dollar per day. Customer insight tells us that small business owners make their choices on insurance based on three factors, which are: recommendation from someone they know and personally trust; price; and the reputation of an insurance company.

wish you had advised me while purchasing the insurance. I have been insured with you for so many years and this is my first claim!” It is not uncommon for insurers to be in situations where new as well as long standing customers cannot be paid a claim simply because they did not have the cover included in their policy. Packaged policies are perhaps the answer to address these gaps in a policy cover along with a host of other benefits. The Middle East, particularly the UAE, has been witnessing hectic non-oil activity for the last six - seven years lead by three sectors – real estate, trading and retailing. It has resulted in the country being recognised as a model growth economy with business friendly policies such as free zone proliferation, low entry barriers, robust infrastructure, skilled manpower and a favourable financial framework. The SME segment in the UAE comprises over 200,000 entities, with a total revenue pool in excess of a billion dollars. Historically, the strategic position of the SME segment within the insurance sector has not been well recognised. But now, with the arrival

of affinity schemes and cutting edge technology solutions this has all changed, and SMEs of today are one of the most sought after businesses by the insurance industry. Over the last five years or so, insurers in emerging economies have refocused their attention on this sector as net retention (the difference between gross policy premium and the portion transferred to reinsurers) on large risks is minimal, while oversupply of capacity (values underwriters are prepared to insure) has led to marginal pricing and high acquisition costs. These factors have resulted in reduced overall profits. Approaching and doing business with the small business market requires calculated efforts. The first question often asked by small business owners is: Do I need Insurance? However, accidents occur when they are least expected. A prudent entrepreneur needs to value insurance as a worthy investment that offers protection and guarantees peace of mind. Obtaining the right type of insurance begins with an understanding of the needs of a business. Customers can purchase

What to look for While selecting an insurer and the type of policy, it is important that your insurance consultant or insurance company understands your business well. Be sure not to under declare the value of your assets or estimates of revenue to save a few pennies. Ask for options on higher deductible (the amount you have to bear in the event of a claim). The savings in premium can be used to build an insurance fund to pay for uninsured losses. Do not hesitate to ask for help towards carrying out a risk management exercise of your business. This is generally free and very useful. To cater to SMEs underwriters have developed products that are easy to sell. Benefits of reduced operational costs and duplicated efforts are passed on to the customer with competitive pricing and low touch single policy documents that drive efficiency and offer benefits.

Ludger Moraes is the director of commercial lines at Royal Sun Alliance Insurance. Ludger has university qualifications in economics and law and insurance qualifications from India and the UK.

Media insight â?&#x2DC;

A wholesome recipe for the film industry The Intelligent SME (TIS) caught up with Indian film-maker Tariq Syed (TS) in the UAE. He discusses his love for cinema, his struggles and the current scenario in the region with regard to media production. TIS: How did you start your career in films? And when did you move to the UAE? TS: My career began much before I earned my post graduation in mass communication with specialisation in Film and TV production from Jamia Millia Islamia in New Delhi, India. I had a burning desire to be in television and film media from the beginning. My career, initially, was focused in making documentaries, travelogues, personality profiles, commercials, corporate, industrial, and touristic shows. I came to the UAE in 1997 and worked for a production house in Dubai, where I also worked on television programmes, and then I moved back and forth into film logistics, commercials, and corporate works. Till date I have over 500 hours of global television works. I run my own company now. We are currently directing and producing three commercial cinema movies. TIS: How encouraging was the regional audience when you began your career? TS: Back in 1997, there was little local television production, satellite TV being the major choice. But the local audience always watched local shows, as they still do. If we talk of the late nineties, Channel 33 was the only local English channel; the rest of the UAE channels were Arabic, although there was a sizeable non Arabic audience. As a TV programme producer, if you had a great concept to develop into a show, it was not easy to produce it. My first TV series, Land of Opportunities was telecast on channel 33, which profiled distinguished members of the business community in the UAE. It

was a successful series, as it telecast the journey of many successful personalities.

and authentic taste for creativity, recreation, and love for falcons, camels, horses and cars.

I wrote and directed a series called Dubai Alive for Sama Dubai TV, and the pilot show of Sonyâ&#x20AC;&#x2122;s popular High Life Dubai as well. Then I developed Dubai 24 hours with Michael Tobias which was a roaring success. The UAE-based audience is a challenge as you have to cater to so many tastes, cultures and diversity; this itself is a big challenge.

TIS: What is the scope of the film industry in the Middle East? How open is the region to cinema and its multiple connotations of themes, ideas and stories? TS: The film industry has a big potential in the region, the opportunity is immense. But our industry also needs support from governments and the private sector. Fundraising is a very big issue here; films need budgets and skills both.

TIS: How have you involved the local culture, environment and people in your endeavours? TS: Having worked and lived here in the UAE has given me immense opportunity to meet UAE nationals from various lines of work and people of diverse nationalities who visit or work here. My friendships, acquaintances and various travails during work and research, have allowed me to learn about the Emirati life, knowledge, customs, talents, deep love for poetry, sea, music, desert, art, craft, love for speed, sports, adventure, legendary stories, struggles of their previous generations before oil, their values

Films offer a vital canvas, greatly different from television and theatre. With the upcoming online media and digital film making, and the new genre of cinema emerging, the UAEâ&#x20AC;&#x2122;s film industry is poised to grow phenomenally. The industry in the UAE needs local writers, actors, directors, producers, animators, special FX artists, visual FX supervisors, cameramen, editors, costume directors, stunts men, designers, set makers, in fact the whole industry. We also need a unique professionalism in the industry, here.

â?&#x2DC; Media insight

TIS: How many people do you have in your company? TS: At OneWorld FilmNet, we are a nine-member team, from animators, editors, to production supervisors, directors and in-house facilities for post-production, sound recording, graphics, high-end animation works, camera equipment and so on. A larger team sits in alliance with us in the US, Malaysia, India, South Africa, and the UK, with whom we work alongside on various projects. TIS: What has been your most challenging project so far? TS: Aboodâ&#x20AC;&#x2122;s Lost Camel is challenging; it has taken three years in development. Now it will combine artists from UAE, India, Malaysia, Serbia, London, and Los Angeles to produce the cinema. We will be coming out with the film by the end of this year. Then there is another 3d movie and a live action film on the cards. Visual FX and animation will become our specialisation ultimately. We will bring in the finest skills to screen to showcase most breathtaking scenes relevant to a story and development. Skilled artists, Emiratis, Indians, Asians and westerners from all across the world are working on this project simultaneously. TIS: What do you hope to achieve through your films? TS: We wish to achieve a special emotion in conveying a story or a

message. Given the opportunity, we can breathe life into characters to tell a story that entertains and connects the land and its people. Films are a philosophical business, good films connect people, destroying stereotypes and spreading good morale. If they are received well by an audience, you know what you have to give them the next time. TIS: What is your opinion of the media production industry in the UAE? TS: The media production industry is segmented. There is still a need for an easily approachable film finance group or a body that skillfully finances movies. The real purpose of media, especially for film production is to share opportunities, not just rent equipment and facilities. There should be a consortium of companies taking up projects, and building shared resources, infrastructure, a more cohesive approach to film making, studios and establishments coming together, plus a revenuedriver mechanism, amply backed by a financial institution. TIS: What are the accolades you have received in your career? TS: I have not followed accolades, though the biggest one was the Dubai 24 Hours book being Arabian Heritage best seller in 2003; the DVD also did exceedingly well. Commercially, I think Dubai 24 hours did its best, and then came the opportunity to receive appreciation

from Sharjah Chamber of Commerce for an assignment. Appreciation from our American and German Clients for a job well done, and a few local newspaper and magazine write-ups also made us feel nice about it. We received a letter of support from Department of Culture, Dubai, for our current venture, Aboodâ&#x20AC;&#x2122;s Lost Camel, and Obaid the Calligrapher, films under production. Within the means if creative works are successfully executed and appreciated, it is the biggest accolade. TIS: As a company functioning in the small and medium enterprises sector, what are your main challenges and aspirations? TS: The biggest challenge for us lies in skills and financial opportunities. An average commercial movie that one will pay to watch, costs at the least US$5.5 million and more. Our aspiration is to build the largest studios here, and open the gates for UAE based film makers to come, team up and produce cinema. In addition to this, we want to tie up with the best distributors, get international artists, and build massive book and film libraries and preview rooms with conferencing to discuss films. From learning to sensitively integrating performance value for actors, all this is a wholesome recipe for film industry to thrive. A culture is born then, which creates and markets, a self perpetual system teamed with mainly Emiratis.

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Media insight ❘

The power of PR Online PR using social media does not always have to be a costly affair. A TIS report.

business enterprise should relentlessly strive to enhance its brand awareness and reputation in the market, while reaching out to increasing number of customers if it aspires to remain ever successful. When the message on products and services is conveyed effectively to the right audience, the term “survival” will soon be replaced by positive ones such as “growth” and “expansion.” The Intelligent SME met an expert in online PR – Tracy Spence, who recently presented a paper to an elite audience at the Digital Marketing Forum in Dubai. Currently with digital and Internet marketing consultant WSI, Spence uses online PR in a her own business and also for her customers. She believes that online and offline marketing strategies should go hand-in-hand to get the best returns for business. Here are some of the excerpts from one of Spence’s presentations that should prove useful for all SMEs. Does reputation matter? Reputation is vital in public relations. When visiting potential customers, one’s reputation possibly makes it to the appointment first. For PR, firstly, it is important to identify who the “public” is. It really is very important to remember that PR is not just customer relations, but it encompasses everybody one meets or one is involved with. PR is all about the impression companies give, and one should remember that it is the people that make a company. “This is all about us and our reputation. Using social media

can enhance your profile, your communication and add to your credibility online, and all for a very small budget,” says Spence.

PR campaigns PR professionals use many different techniques as part of their PR campaigns: networking, public speaking, freebies, sponsorship, media relations and viral campaigns. The aim of PR is to handle bad news, in addition to promoting good news. So how can social media help PR efforts? Let’s have a look at the traditional methods, one at a time and understand how social media fits in with these.

Tracy Spence, online PR expert.

PR versus advertising With public relations, a company does not pay directly for the exposure it secures. It is a third-party endorsement that gives PR its power and credibility; again, all that matters is what people say about a company. Public relations can play a critical role in achieving a competitive advantage, such as opening new markets, creating a high value for products and services, attracting employees of high calibre, accessing funding and investors, and protecting one’s businesses in times of crisis. There is a real gain to be had from using PR. Lack of good PR could result in limiting markets, attracting employees that may not be 100 per cent enthusiastic about working for the company, low level of confidence from funding entities or investors and the worst case scenario of no business at all.

Networking: A long-term relationship building activity. “We like to trust in the people we buy from,” affirms Tracy. Traditional networking pertains to one-on-one interaction in a real environment. Online, as with offline networking, there are many opportunities to meet people. Social media groups such as Facebook, blogs and Twitter are great examples. Here, one must understand the “rules of engagement,” but generally they are the same as offline; one must always be seen as professional, but authentic too. Forums, blogs and social sites have been the ruin of many a reputation online. It is vital, therefore, to teach the importance of acting responsibly online, so as not to engage in any controversy. Public speaking: This is face-toface interaction between a speaker and the public, but the speaker is the focus of attention for a length of time. He or she is the face of the company - the representative. Generally, for these events preparing well is a must. Therefore, the public

❘ Media insight

speaking event should be one representing the company in the best possible manner. It can be posted as a video recording online, or even embedded onto a website for additional benefit. Freebies: One of the most costeffective ways of promoting a person and the business is by giving some free advice. This is often done in a face-to-face situation, and again, through networking and public speaking, where guidelines and tips are offered to help others. Online, there are many opportunities to help other people. One of the sections in professional website LinkedIn is dedicated to asking and answering questions. Blogging is another great way of offering hints and tips because it will be indexed well by search engines. Alternatively, organising a webinar is a great idea. This is similar to standing up and giving a presentation, but it is done online. One would need a screen sharing software, a computer with microphone, a speaker and a presentation. To help get attendees, one can also use social media. Twitter is great for this purpose. Sponsorship: Sponsoring a local charity, school or sports group can also raise a company’s profile, by donating products, services, money or just time. The benefits of sponsorship, no matter how small, are very real. The biggest personal benefit is a feel good factor, knowing

that the company has acted with social responsibility. This in turn can be announced on social networking websites and blogs. Media relations: When considering the media, the choice is automatically, television, radio and newspapers. Online, there is an opportunity for all businesses to own their own television channel, radio station and publish press releases online as well. With video download websites such as YouTube, all videos can be posted online to increase exposure on the web and enhance credibility. Video upload websites also offer the opportunity to use keywords in order that a particular video can be found. Similarly, this can be done with audio files, by creating a podcast. Online press releases are a great way to gain fame. Journalists are always looking for a new story, and if they don’t have to write it themselves, it really helps. Remember, journalists are not just from the national papers, but could be from specialty magazines. A story could be of interest to someone, somewhere. Viral campaigns: Traditional PR can include a viral campaign, sometimes called a “word of mouth” campaign. This relies on people to pass a word around to get a product or service known. With the Internet, e-mails and social media, an online viral campaign is so much easier to do, and, gets great results too. RSS feeds can be added

Tracy Spence, presents her paper at the Digital Marketing Forum in Dubai.

to the Twitter page so that people can receive news directly into their inbox. With apps to integrate, managing a campaign can be a simple process. There are websites especially designed to make life simple by delivering news to more than one place at a time, and this is called syndication. With social media one clicks a button and off it goes. The next stage in the process is to monitor the efforts, and again there are online tools that can help to see exactly where the news has ended up. Traditional PR is a great way to get a company noticed. But with the trend of using social media growing rapidly, it is important to know how to use it to maximise the impact. Start using it to your best advantage, without anymore delay.

Media insight ❘

Single click to cybercrime Dynamic, sophisticated threats require real-time web security defense. A TIS report.

mall Business networks are at a greater risk of being compromised without the expertise of a dedicated IT team. As technology advances, new network security threats surface even faster and small businesses should understand and acknowledge the threats. Most often, security issues are pushed to the bottom of any list. However, without further exposing an organisation’s network, a solution that fits a company’s needs and prepares it for tomorrow’s threats should be adopted. In a recent report, Blue Coat Systems Inc. has examined web behavior and the malware to which users are most frequently exposed. The 2011 Blue Coat Web Security Report analysed web requests with the Blue Coat WebPulse service, which rates every week nearly three billion requests in real-time, to provide a comprehensive overview of the changing ways in which people are using the Internet and the new methods cybercrime is using to target their attacks. “Today, dynamic web links are the most powerful tool cybercrime has, and static web ratings that require update cycles are too slow when bad guys can harvest users within minutes,” said Nigel Hawthorn, vice president of EMEA, marketing, at Blue Coat Systems. “Only a realtime defense that can dynamically rate content and follow multi-staged malware attacks from beginning to end will be able to protect users.” Web usage trends The report also found some surprising web usage trends. Social networking recently emerged as the new communication platform. Blogs, chat and e-mail are the second, third and fourth most requested

subcategories of social networking, respectively. At the same time, webmail was the seventeenth most requested web category for 2010, falling from ninth in 2009, and fifth in 2008. This ongoing decline in popularity is driven by an overwhelming shift to social networking as the communication platform of choice for internet users. The effects of the global financial recession have also been felt in internet usage. According to the report, web behavior has become more business focused, owing to recession. Blue Coat saw a significant decline in requests for web content in the dating and adult content categories in 2010. While these categories were fourth, fifth and eighth, on the list of the top 10 most requested categories in 2009, audio and video clips, new media, and reference dominated the top 10 in 2010. Shifts in threats The web-based threat landscape continues to become more sophisticated, utilising a combination of techniques and multiple stages to launch attacks. Some of the biggest shifts for 2010 were listed in the report, which underlined that social networking has become malware vector. In 2010, cybercrime successfully exploited trusted relationships between friends to quickly infect and harvest new users. Social network, phishing and clickjacking attacks were the two most common types of attacks through social networks in 2010. The shift of phishing attacks to social networks is particularly driven by attempts to obtain user credentials that can also provide access to banking, financial and other online accounts that use shared passwords. Once the name and logo of a global

Nigel Hawthorn, VP EMEA Marketing, Blue Coat Systems

brand is displayed at the top of a page, users think that the site is legitimate and can be fully trusted, which is not the case. Users are also warned that malware hides in acceptable web categories. Historically, malwares are hidden in categories that are traditionally blocked by acceptable use policies. However, online storage and open or mixed content, which ranked second and sixth, respectively, on the list of sites hosting malware, saw the fastest growth in 2010.

Social network, phishing and click-jacking attacks were the two most common types of attacks through social networks in 2010. Along with increasing interconnectedness of computers, sophistication of software we use, and the speed of hardware, comes increasing threats of viruses. There is no question that everyone needs to protect their computers from viruses, but can it be done without spending lots of money to buy anti-virus software and spending even more money in yearly subscription fees to keep the software up-to-date? In a word, yes! Keeping safe from viruses There are several precautions to take, in order to keep computers safe from viruses. The first step is installing

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Media insight ❘

It is best to rely less on reputation ratings. To avoid detection, cybercrime is increasingly hacking legitimate sites with reputed ratings and using those sites to host attack infrastructure. A defence that only utilises reputation ratings will leave its users exposed to those attacks. As people become more mobile, remote users require better protection. Web access is ubiquitous, so web security needs to be 24/7 regardless of location.

Top categories for hosting malware

the latest anti-virus software, which could be paid or free and found on the internet. But, the pros and cons of a paid and free version should be weighed carefully. Updates: An anti-virus software as well as a computer’s operating system, internet browser and e-mail client should all be updated regularly as new threats emerge almost on an hourly basis. Viruses take advantage of security problems in a computer’s software and there are patches to download against these risks.

Even e-mails that arrive from a known friend may contain attachments with viruses. Common sense: One does not need to be a genius to protect his computer from viruses. It is best to immediately delete any strange looking e-mail rather than opening the attachment out of curiosity. Even e-mails that arrive from a known friend may contain attachments with viruses. Safe neighborhood: Trouble lurks in dark areas in real life and the same rule applies to cyberspace. Avoid visiting questionable sites of all types and forms such as those that offer passwords and keys to hack into systems or software. The browser: As viruses make use of flaws in internet browsers, select your software wisely. Unlike before,

there are numerous browser options, which can be downloaded for free. Browsers also offer free updates and security patches from time to time. Protection There are lessons that organisations can take away to better protect their employees and their confidential data. First, dynamic defence is key for malware protection. Using dynamic links, cybercrime can build attack infrastructures, changing only the location of the malware deliverable. Blocking malware delivery, call home attempts, scams and phishing requires a defence that can respond dynamically to rate new and unknown content and analyse the dynamic links that increasingly are part of malware attacks. We should also remember that real-time ratings are crucial to a successful web defence.

• • • • • • • • • •

Suspicious Online Storage Adult Content Computers/Internet Search Engines/Portals Open/Mixed Content Personals/Dating Web Hosting Software Downloads Phishing

Most clicked categories for consumers

• • • • • • • • • • •

Computers/Internet Search Engines/Portals Audio/Video Clips Online Storage Software Downloads Non-viewable (Web tracking sites) Education Reference Open/Mixed Content Shopping Social Networking

Top 10 Most Requested Categories in 2010 2010

2009

Search Engines/Portals

Social Networking

Web Advertisements

Computers/Internet

Search Engines/Portals

Social Networking

Personals/Dating

Content Servers

Pornography

Audio/Video Clips

Computers/Internet

News/Media

Audio/Video Clips

Shopping

Adult/Mature Content

Reference

Webmail

Open Mixed/Content

Illegal/Questionable

Marketing insight ❘

Unravelling the “buy” button What appeals to a consumer can now be studied scientifically, using Neuromarketing, explains Dr. Swaroop Savanur.

whole new pathbreaking development in the marketing space, involving the studying of the behaviour of the human brain, promises to be a much larger upheaval than the information revolution. Called Neuromarketing, this new marketing technique is increasingly being used to map consumer behaviour, and use the findings from there to improve sales. Derived from the field of Neurosciences, Neuromarketing techniques deal with the very essence of our humanness and our ability to ask the question “why?” It is common knowledge that a

human brain is always making decisions – from something as mundane as whether and how much to eat or sleep to choosing between different brands of the same product. Neuromarketing deals with understanding why a brain reacts in a certain way, and using the findings to strategise sales and marketing. This option of choice at the disposal of a consumer has always challenged advertisers. The utopian question that all advertisers ask is what one should do to influence a consumer’s choice against competition. Billions of dollars have been spent on researching, conducting demographic profiles, market

surveys, and filling up questionnaires, to answer that question. The workings of Neuromarketing With money pouring in from industry leaders, neuroscientists and researchers are unravelling the mysteries surrounding the way our brain chooses one product over another. In other words, what appeals to the brain and what does not can now be scientifically studied, thereby helping companies take informed decisions while charting out their marketing plans. Companies like Daimler Chrysler, Volkswagen, Coca Cola, Nestle and others are already using

❘ Marketing insight

neuromarketing research findings to modify their advertising, branding, designs and product placements strategies. Neuromarketing is, in fact, the psychoanalysis of the brain, which makes the decision to buy. A person goes through a series of conscious and subconscious, emotional, sensory, and rational decision making processes before purchasing a product. To peer into the brain and to look at it as it makes a decision, one needs a dynamic brain scanning tool, namely an fMRI or Functional Magnetic Resonance Imaging machine. This machine detects the areas of the brain that gets activated while viewing an advertisement, by measuring in real time, the amount of blood flowing in the various areas of the brain. The fMRI, originally used for detecting headaches, paralysis and lesions in the human brain, has allowed neuroscientists to focus on those areas of the brain that influences a buying decision and thus, get a bird’s eye view of a consumer’s purchasing behaviour and attitude. P. Read Montague of Baylor College of Medicine, for example, performed a taste test between Pepsi and Coke, using an fMRI in 2004. Montague gave 67 people a blind taste test of both Coke and Pepsi, and then placed his subjects in the scanner, whose magnetic field measures how active cells behave by recording how much oxygen they consume for energy. After tasting each drink, all volunteers, without any exception, showed strong activation of the reward areas of their brains--which are associated with pleasure and satisfaction--and they were almost evenly split in their preferences for the two brands. But when Montague repeated the test and told them what they were drinking, three out of four volunteers said they preferred Coke, and their brains showed why: not only were the reward systems active, but memory regions in the brain also lit up. The test showed that although there was a majority of people who

Few Neuromarketing Successes ü Representatives of Procter & Gamble attributed the success of their product ‘Febreze’ to neuromarketing. ü To Motorola, neuromarketing had important implications in positioning of their products. ü Buick used neuromarketing to improve dealers’ experience with customers, thereby increasing sales from nine to 40 per cent. ü During tests on young adults, using real-time functional MRI (fMRI), the logos of well-known auto and insurance companies lit up areas of their brains associated with positive emotions. In contrast, less-recognised brands triggered more activity in brain regions associated with negative emotions -- suggesting these products were less easy to process and accept. preferred Pepsi over Coke, the brand recall value of Coke became an overriding factor over the sensory pleasure of better taste of Pepsi. We know that consumers make decisions at a deeply mental level, driven emotionally and instinctively. The aim of any marketing strategy is to analyse the process of this decision making and the logic behind it. Surveys, questionnaires and focus group interviews were, and are, still, aimed at trying to understand what a mind is thinking and whether a

proposed advertisement is going to cater correctly to consumers’ needs, expectations and inner desires. Unfortunately, almost 90 per cent of all advertisements fail to provide the desired result. This is especially compounded by the fact that consumers live in a state of ‘advertisement overload.’ A consumer is subjected to all sorts of marketing: from advertisements on television to print adverts, billboards, inbranding, ads on the net and now, the latest being social media

Marketing insight ❘

marketing. This results in confusion and attention disorder. It has now become all the more difficult to grab the attention of the target consumer. Neuromarketing does look promising because it proposes to use scientifically proven brain research in the field of advertising. The “father” of neuromarketing, Professor Ale Smidts - winner of the Nobel Prize for Economy in 2002 - coined the term, which designates the use of identification of techniques of cerebral mechanisms to understand consumer behaviour in order to improve marketing strategies. According to neuroscientists, there are three main parts to the human brain, each functioning as a brain unto itself. These “three brains” - nestled inside one another are: the “Neo” (new or ourter-most) brain, the “Mammalian” (middle) brain, and the “Reptilian” (old) brain. The Neo brain is the most evolved part of the brain, known as the cortex. It is responsible for logic, learning, language, conscious thoughts and our personalities. The Mammalian brain,also known as the limbic system, deals with our

emotions, moods, memory and hormones, while the Reptilian brain,also known as the R Complex, controls our basic survival functions, such as hunger, breathing, flight-or-fight reactions and staying out of harm’s way. It is now clear to researchers that the reptilian, or “old” brain drives customers’ buying decisions. So, if we know exactly how we can engage a consumer’s old brain, make him associated with a product or service and make him feel uncomfortable if he doesn’t make a buying decision, it would be simpler to market the product. More significantly, it would ensure unnecessary spending! By understanding their consumers better, companies could prevent unnecessary failure of their advertising campaigns, while ensuring that they go as close as possible to delivering to the former’s needs. This will automatically result in increasing sales of a company. Of course, it is impractical to expect all companies to have their fMRI’s done. However, the good news is that there is now

sufficient evidence available through various fMRI findings and other neuroscience research studies, to use neuromarketing without requiring spending a lot of money. Off-the-shelf neuromarketing tools such as IMPACT, which will be launched soon, are available for companies to gauge the effectiveness of their ads. However, there is still significant amount of research that needs to be done to understand the real workings of the brain. The information available today is just the tip of the iceberg, but at the same time, there is no doubt that neuromarketing is here to stay, as it is a path-breaking, scientifically driven new-age marketing strategy, which will be increasingly used by companies to enhance their advertisement productivity while reaching out to the consumers of the 21st century.

“By understanding their consumers better, companies could prevent unnecessary failure of their advertising campaigns, while ensuring that they go as close as possible to delivering to the former’s needs.” Dr. Swaroop Savanur.

Marketing insight ❘

Selling in a challenging environment A majority of new SMEs fail to understand that it is their marketing plan that should run their businesses, writes Zed Ayesh.

ccording to an annual survey (2002) conducted by the Global Entrepreneurship Monitor (GEM) worldwide, there are about 300 million persons trying to start about 150 million businesses; about one-third of these attempts, which works out to nearly 137,000 start-ups per day, end up being launched. The survey also indicated that about 120,000 new attempts, probably, get terminated each day. In another survey carried out by Money Works magazine in 2010, it was reported that SMEs controlled 95 per cent of all businesses worldwide, contributing between 3545 per cent of the global GDP and 85 per cent of the world labour force.

per cent in the first two years and more than 81 per cent in the first 10 years of business. Of those failed businesses 10 per cent close involuntarily due to bankruptcy and the remaining 90 per cent close because the level of desired income is not produced. This emphasises the importance of planning by an SME wishing to succeed. So, when someone asks me questions like how to sell products (services), I always answer with questions: Why should any customer buy from you, or how are you different from competition?

In the UAE, according to Emirates Industrial Bank, the UAE houses 208,000 SMEs, accounting for 80 per cent of the country’s total number of companies. As per the data from Dubai Statistical Center, 98.5 per cent of registered enterprises in Dubai are SMEs, employing more than 61 per cent of the total workforce in Dubai.

It is quite amazing that 55 per cent of all SMEs come to do business without any written plan and for the ones with marketing plans, we tend to find a disconnect between what’s on papers and the real life experience of businesses; most SMEs fail to relate to CRMs, actual sales, projections into book keeping, and actual results into key indicators. To make a long story short, the majority of new SMEs fail to understand that their marketing plan should run their business.

Dun & Bradstreet reports that new businesses with less than 20 employees fail at a rate of 63

Perfect marketing can be perfect only if it is built on solid marketing principles that deal with all business

aspects directly. I consider seven main critical principles or the seven “P”s that should be examined, evaluated and aligned with operational activities of any business on a regular basis. These critical principles pertain to product (or service), packaging, place, price, promotion, people and perception, Product or service Defining the product or the service in a business is vitally important. Yet, most SMEs cannot clearly define what product or service they are selling to their target customers. Many SMEs get confused about the nature of their business and its functionalities and what they sell. For instance, a brilliant person established a media monitoring company in Dubai Media City with his local partners. For the first six months the company struggled to acquire any client. One of the major reasons for the failure to secure clients was the company’s inability to distinguish between what it was doing and what it was selling. In other words, the company was in the business of media monitoring, but it was selling something else. When I was called over to assist in the sales of the new company, I was

❘ Marketing insight

still new to the Dubai market, having just moved in from the US, and I was under pressure to act quickly as time was not a luxury. Of course, after a few months of thorough research we concluded that the company was selling customised delivery services. Today, the company is a different proposition, as it is selling delivery services based on a client’s specific demand. This company is now engaged in searching, scanning, reading, clipping, writing briefs and delivering to clients media monitoring in what is described as media alerts via e-mail, on a daily basis. The company delivers media alerts three times a day: early in the morning for all local newspapers, midday for all regional newspapers and, later in the day, for international newspapers, magazines and electronic media. In all total, the company delivers about 2000 articles, on an average per day, to its clients. Packaging Most SMEs especially in the service sector are challenged everyday with packaging of their services. It is not easy to package intangibles. When dealing with services, clients find it very hard to distinguish between a business and an individual they are dealing with. A service provided to a client is based on an interaction between the client and that business’ different representations, including people who come in contact with the client. Product packaging is a critical principle of marketing, and at most times the packaging is the only

direct contact between a company and its prospective customers. So packaging is not only a science, but also an art. My favorite example of the effect packing can have in a market is of a company called Method in the US. Method entered the highly competitive business of household cleaning items such as hand wash and liquid dish soap, an industry controlled by giants such as Procter & Gamble, and Unilever. Of course, Method didn’t reinvented hand wash liquid or the dish washing soap, but it introduced better packaging. Method took the same products manufactured by others, created a new, more artistic packaging and put them on the shelves of retails outlets. Method’s marketing and sales strategy depended on its newly designed packages. Today, Method enjoys huge success in the US, quietly chipping away at the market share of the industry leaders for a company of its age and in such an industry. Place The ease at which one can purchase a product is also equally important and so are the considerations involved with distribution. A classic example is an FMCG product from an SME. The right place for such an FMCG product would be an outlet like Carrefour. But can a new SME afford such a channel of distribution? Most likely, the answer will be in the negative. Price Pricing strategies can be quite complex. SMEs could use its costing as a guideline to set a final price for its products; it could also use competition price as a benchmark.

Sometimes, SME owners and managers use their own hunches to set a price. However, value of the product or service is the relationship between what a customer gets and what he pays for it. Thus, value is not necessarily entirely in the hands of an SME. It also means that the value of a product is not derived entirely from the message that an SME tries to convey, but what a customer perceives and how he accepts the message. And it is through this process a product eventually realises its market value. Promotion Telling the targeted audience about products (services) will not induce them to make a purchase unless the previous five marketing principles are well crafted and the message is well articulated to make them understand that a need will be fulfilled from making such a purchase. Promoting an SME will only generate leads for the business; it is up to the rest of the marketing principles to sell the products or services. People All said and done, it is the people that will make or break a business. A good plan should include recruiting and selecting right people, training and development plans of staff, career path planning, incentive and reward programs and above all, an involvement plan and staff empowerment. Perception The most powerful and the most underestimated marketing principle is the perception of potential customers of a product or service or of the business as a whole. Thus, having a plan to manage potential customer perceptions is important, although it is no easy task, as it involves tracking multiple factors, including unpredictable factors like the customers’ feelings. In my opinion managing perception is the ultimate conclusion of marketing principles, as marketing efforts need to conclude here. A business can transform the demand for its products and services by managing public perception in a certain way. A change in perception can transform the product or service to being one in demand.

Marketing insight ❘

Making noise without screaming

How well a marketing campaign is carried, makes all the difference, says Umer Razzaq.

t a time when businesses are trying that much harder to survive, how effective is it to depend on the oldest routine in the book – marketing? The answer to this question is simpler than you think – only difference is how well you do it. There are two ways to get noticed and spending “squillions” of advertising dollars is just not the solution. It all starts with a strong product and knowing your product’s “colonel.” Once you are aware of that, then no matter how you talk about it, your customers are going to understand you, and if you talk about it in an interesting way, they will remember you.

Why advertise? This is a question that is on every business owner’s mind. Especially when they themselves receive direct mailers, flyers, and brochures from companies they are not aware of, or do not want to be bothered about. Unsolicited direct communication can force a mindset to become anti-

advertising, and a business owner might think such a strategy to be a waste of time and the ever-soprecious money. The aim of any business, irrespective of its size, is to sell goods and services and make profits. Thanks to online and social media, today’s customers are well-informed about the choices they make. They will only go for goods and services that they need, and this is where advertising makes its best moves. You may be selling the ‘it’ product or a product that is very specific to an individual’s needs. If you are not keen on investing in its advertising, your customer may never get to know your product even exists. Especially when there are so many just like you, offering the same, or even better services and features. This brings us to our next point. The message Think of the most important advice someone has ever given to you when you were a kid. “Be responsible,”

❘ Marketing insight

your marketing efforts. Don’t let anything go to waste. Be curious: Like your customers, you have to be curious about everything. You don’t have to be Wal-Mart to grab your audience’s attention. Know the pulse of the action, get involved and stay connected with them. Make use of technology to stay ahead of your competition.

“work hard,” “be smart” and the list goes on and on… You follow them, listen to them and abide by them, because you know they will help you. Advertising is a similar experience. The only difference being, instead of people, it is brands that tell you what you should do with your money and how it will benefit you. It is all about the message. If your product is a car, then the message is the fuel that drives it. The message is what makes or breaks a product. The readers This is often the biggest problem with most advertising – identifying the “target audience”, a vague term, to say the least, and is ultimately responsible why advertising does not work as well as it should. One way to know the mindset of your target audience is to ask yourself one simple question: why would you buy your own product? Now, break your answer down into three pieces: the need, the cause and the truth. This will help you fragment your desired audience, because you will know exactly what to say and who to say it to.

The five-step action plan

you are uneasy and overwhelmed by technology. You do not go out buying books that sell “jargon.” A product becomes a best-selling phenomenon only when its purpose is easily understandable. Be credible: It is in our nature to distrust advertising. Claims need to be real and credible. Make a habit of getting customer reviews – the more, the better. Reading product reviews puts us in our comfort zone. It allows us to sleep better at night. Roy H. Williams, the bestselling author of the Wizard of Ads says: Any claim made in your advertising which your customer does not perceive as the truth is a horrible waste of ad dollars.

Be reachable: Make sure you walk the talk. Every small business thrives on the mantra, “at your service.” When a customer is going to give you a phone call after looking at your beautiful ad – he/ she does not know why phone lines are down in your office. Don’t hate the messenger A poor response to an ad is not the medium’s fault. The problem often lies in the message. Advertising is not an easy task – It is not a “quick fix” – but if done correctly, has proven to work wonders for businesses of all sizes and interests. Just remember, the world’s most well-known and respected brands were once unknown too, until they started marketing their brand.

Be skeptical: Big conglomerates have greater margins for error. They can afford to waste advertising dollars and resources without getting any tangible results. A small business owner does not have this kind of leverage. Make use of things like coupons, codes, and specials to measure the headline, timing, and placement of your advertisement. It can be as simple as asking your customers how they have heard about your business. The point is to make use of every possible, resource at hand to measure the strength of

Be single-minded: Getting a high response rate from an ad usually boils down to relying on a single message. Your small business advertising needs to be quick on its feet and needs to convey the right message in three seconds or less. You buy “PC for Dummies”, if

Marketing insight ❘

Segment and differentiate, or be at loss John Lincoln highlights the importance of including segmentation as part of the marketing proposition.

have often noted that marketers and companies normally execute the application of their segmentation strategies too narrowly. Segmentation is often myopically thought of in a single dimension as clustering customers in homogenous groups for marketing purposes only. This is a fallacy as segmentation drives the very essence of how an organisation operates, serves and meets the needs of its customers. Before I dwell further, I think I ought to refresh you on what a market is. Most of us know it in generic terms, but do not stop and think about what it really means. It is important for a business of any size to think through the essence of what a market is, before marketing its propositions to customers.

Any segmentation framework has to be actionable. Are your customers ready? So what is the essence of a market? First and foremost, a market has to have customers with unmet needs or wants. If there is no unmet need, or if your value proposition does not offer anything incremental, or if you don’t differentiate your proposition, then there is no point in being in business. Secondly, consumers and, or businesses, should have a willingness to buy. You don’t just “build” and have customers flocking to you. Thirdly, there has to be buying power. Consumers and businesses have to be able to afford what you offer. Last but not least, whoever is buying has to have the authority to buy. In

other words, how do you make your customers ready, willing and able? It is important that we keep this simple logic before we embark on an expensive proposition development or segmentation exercise. Segmentation is commonly known as a process in which customers are grouped or clustered into homogenous groups based on demographics, psychographics, needs, spending patterns, cultural background, education, language, mobility and others. As you will see later, segmentation is not just for marketing purposes only. A proper segmentation strategy will help you not only target and attract customers better, but it will also set the tone and framework for how you serve them and how you are organised to serve your customers better. The musts of segmentation Most folks often ignore the fundamental rules of segmentation. For any segmentation exercise to succeed, it is important that these basic rules must be met. I have often seen marketers using psychographics and other segmentation ways that are not relevant to their industry. The reason they do it is because they fail to clearly understand the M.A.S.A rules. Measurability (M) Any segmentation of a market should be able to measure the size and purchasing power of the segments. Without this you will not know if the market that you are after, is attractive, viable or sustainable. Accessibility (A) You should be able to effectively reach a segment. If you cannot economically, emotionally or logically reach a segment, it is not worth pursuing.

Substantiality (S) Size does matter here. There is no point going after a segment where the volume or the profit pool is minuscule. I know the naysayers might not agree. I am referring to the primary segmentation framework here. Yes, of course, you can have secondary, tertiary and micro segments. You can even practise one to one marketing (that is a topic for another time). What I am referring to here, is only about the primary segmentation rules. Actionability (A) Any segmentation framework has to be actionable. You need to clearly think if your marketing strategies and plans can attract the segments that you are defining. How do you segment the market? This is often done through a combination of primary and secondary research. There are many ways to approach the problem. A common way is to first do a set of qualitative studies (using limited focus groups). The outcome of these qualitative studies is then used to formulate a segmentation hypothesis, which is then validated through a detailed primary research, encompassing a much larger and statistically valid sample. Then, using advanced statics modeling, the segments or clusters are derived. If you are a small business, you probably cannot afford the cost and sometimes the incompetency of outside firms doing this. The outcome A good segmentation exercise will not only be able to group and quantify the size and value of each segment, but also enable you to

❘ Marketing insight

develop portraits of each segment. The portrait of a segment could include their lifestyle and values, priorities, aspirations, needs, demographics, attitudes and preferences to your company’s and competitors’ products and services. Other valuable information could include triggers and barriers to adopting your products, durable and white goods ownership and how disposable income is spent as well as internet, TV viewing habits and print readership benefits among many others. The applications of segmentation A good market segmentation framework will help you design and craft propositions that are relevant to a target segment, develop retention strategies that prevent certain segments of customers leaving you as well as enabling you to spend your communications spend more effectively. The segmentation work that you have done will also enable your company to have optimal and differentiated pricing strategies for different segments. After all, when economists refer to a demand curve, they are actually referring to the aggregate average demand curve across all different segments in the market. (Now you see the link between economics and marketing.) A good segmentation exercise will also enable your frontline sales and service folks to identify a customer upfront as to which segment he or she belongs to. Just imagine the

opportunity costs lost in trying to close a deal with a wrong prospect. Value matters Market based segmentation alone is not enough. You will also need to know where you are getting your value from. If for example, 80 per cent of your customers generate about 20 per cent of your revenue, then resources have to be disproportionately allocated to the ones that matter. Value based segmentation will ensure that your customer services are prioritised at all customer touch points, albeit at the call centre or your channels. It will ensure that your credit and collections policies reflect the dependency of your profits on your high value customers. Therefore, it is imperative you know that you also need to have an overlay of a value based segmentation to ensure that high value customers deserve the royal treatment that they so fully expect. Segmentation and organise In the old days, most organisations are grouped or segregated around their product lines. If “customer is king,” then it behooves you to organise around your customers. World class marketing companies in the fast moving consumable goods sector, telecoms, banks and other industries organise around the customer segments that they serve. I recently met two executives from a well known and very popular smart phone maker. Out of curiosity, I asked them what their segmentation

and differentiation strategy was. I was bluntly told that they do not do have any segmentation and that they do not need to. I am tempted to believe that it is their ignorance rather than arrogance, as these two were from one of their regional offices in Europe and are, probably, not enlightened yet to the strategies being formulated and planned at their headquarters. No matter how big or small, you need to segment and organise around your target segments within the market or markets that you are after. You can only ignore this if you are into commodities, or, if you are a monopoly; otherwise, segment and differentiate!

John Lincoln has over 20 years of experience in telecommunications, worldwide, and is currently the vice president of marketing at Du. He has extensive senior expertise in international telecommunications sales, marketing, business development and customer service delivery.

Innovation ❘

what really matters? Are we really measuring what matters - the magnitude of the idea or that of our PASSION? Kristina Nyzell finds out...

very SME event, business start-up club, and new business accelerator programme that I have attended in recent years always has the same message by the keynote speaker, “To start a business and become an entrepreneur, you first need to have a great idea!” The speaker then goes on to say that one should focus all available time, money and effort into translating this idea into a business. No wonder there is a general fear in sharing and discussing ideas, if the belief appears to be that successful entrepreneurship relies on finding that one single and unique idea that is going to make one successful and rich. Copying, stealing it or plagiarizing, it appears to be the easy way going forward. Yet, anyone who has ever set out to walk the path of entrepreneurship knows that it is not a singular activity but a collaborative effort that counts. An idea may be copied, however, when copying takes place the underlying thought process, the

passion, procedures and also the network of people to make the idea happen is often lost in the moment of intellectual property theft. What really matters I am a woman, an intrapreneur, an entrepreneur and a recently turned social entrepreneur that has spent the past twenty years thinking about what it is that really matters in the context of entrepreneurship. Are we really measuring what matters - the size and magnitude of the idea or the size and magnitude of our passion? With other female entrepreneurs, I often find myself discussing my passion, my purpose in life, creating and giving meaning to life and others, transforming the world into a better place for our children, grand children and great grand children to inherit. Looking for opportunities to collaborate, help, support and nurture each other to share contacts and grow our network. giving unconditionally of what I know and care about. These conversations more often

than not take place at the table in someone’s kitchen, after the kids have been put to sleep and the family dinner has been cleared away. The conversations are rich, deep and fun. We discuss the journey of becoming an entrepreneur (for many it is a lifestyle choice) based on the life truth of knowing one’s passion and being able to place it at the centre of one’s life to give it meaning and then turning that life choice into a business.

❘ Innovation

We discuss the challenges we are faced with and if these challenges would have looked different had it not been for the fact that we are women (we know for sure that our consultancy charge out rate increases by 30 per cent when we work with another man in selling and delivering a project). At the end of the day, most of us are happy with where we are in our lives, the successes we have achieved and how our lives have turned out.

passion? Have you found your purpose in life and are you working on something that makes you happy? Richard Branson was once asked what it takes to become an entrepreneur. His answer was, “Passion!” I leave you to wonder over what entrepreneurship is - whether it starts with an idea or a deeper sense of passion and emotional belonging, in the hope that you will find yours in the same way as I have found mine.

After one of those late evening kitchen conversations with my female entrepreneurial network, I find myself again at yet another SME event. This time the event starts with a dozen double handshakes. Business cards are changing hands with the left hand while the right hand does the meet and greet. The conversation is wandering in the direction of: Where are you from? Who do you work for? Where is your office and how big is it? How many employees do you have? How is business? (In other words, how much money are you making?) Is business good and is it growing? What does your expansion plan look like? I turn around and ask: What is your

Kristina Nyzell is the owner and M.D. of Disruptive Play FZ LLC, a Dubai-based Human Resource Consultancy. She is an experienced strategy consultant specializing in open source, lead user /collaborative innovation and community development.

“Ideally, since 80 per cent of your life is spent working, you should start your business around something that is a passion of yours. If you’re into kite-surfing and you want to become an entrepreneur, do it with kite-surfing. Look, if you can indulge in your passion, life will be far more interesting than if you’re just working. You’ll work harder at it, and you’ll know more about it. But first you must go out and educate yourself on whatever it is that you’ve decided to do - know more about kite-surfing than anyone else. That’s where the work comes in. But if you’re doing things you’re passionate about, that will come naturally.” Richard Branson

Free zone insight â?&#x2DC;

A zone of opportunity Cecilia Dâ&#x20AC;&#x2122;Cunha examines the benefits of setting up companies in the Sharjah Airport International Free Zone.

he year 2010 saw significant efforts from various government bodies in the Middle East and North Africa (MENA) region to adopt business regulation reforms that could enhance trade opportunities for domestic investors.

With approximately 5000 companies operating out of this jurisdiction today, the Sharjah free zone has experienced phenomenal growth since its inception in 1995.

Global players and ambitious small and medium enterprises (SME) now realise that the MENA region cannot be ignored due to its tremendous earnings potential. Now, in light of the recent instability in many parts of the Gulf, the United Arab Emirates continues to stand out as the most promising local hub in the region for global businesses. Over the years, the UAE has successfully portrayed itself as a free market economy and has made significant investments into the infrastructure of the country, making it an attractive destination for foreign direct investments. In particular, the emirate of Dubai has emerged as a global city and a business hub, making strategic decisions to move away from its dependence on oil

reserves and seeking to establish itself as a tourist destination with real estate and financial services as its key regional and global drivers. When seeking to establish a corporate presence in the UAE, the options are numerous. Each of the emirates offer local business opportunities in accordance with the UAE Commercial Companies Law and permit partnership agreements between nationals and expatriates, or nationals and foreign companies. However, the law necessitates national ownership of at least 51 per cent of the company. The government has also initiated the development of several free zones - designated areas with their own clearly defined borders, special tax, customs, and import laws. Currently, there are 40 free zones operating in the UAE, including those under development and 90 per cent of them are Dubai initiatives. Some of these free zones have aggressive marketing strategy and, therefore, are far more successful in inviting new setups than others.

❘ Free zone insight

Due consideration must be given to the needs of the establishing entity, chiefly in light of the fact that setting up in the emirates of Dubai or Abu Dhabi are expensive endeavours. So, for example, when the cost of setting up and running operations takes a precedence over other key decision-making factors, one needs to approach jurisdictions where the barriers of entering the UAE market are relatively low while providing competitive benefits to the investor. Among the various options, the government of Sharjah has successfully established the Sharjah Airport International Free (SAIF) Zone in the midst of its industrial hub and gained popularity among the SME sector, as the jurisdiction offers a host of advantages to its investors. SAIF Zone chairman Sheikh Abdulla bin Mohammed Al Thani has maintained that the free zone is committed to the mission of “… exceeding customer expectations…”, which is undoubtedly why so many companies has found the jurisdiction to be an investor-friendly destination.

Since there is a plethora of options available to the uninformed investor, there is a real challenge to identify the most appropriate option. Therefore, it merits special attention to analyse and discover the value offered by a particular jurisdiction to an investor in terms of licensing options and criteria, proximity to sea, land, and air facilities, cost of setting up and running operations, authority efficiency and related services. It is in fact, advisable to use the services of professional consultants who assist with business formation services so as to make informed decisions and to safeguard from dangers of contracting into something unintentionally that become a binding commitment at the various jurisdictions. There are experienced professional consultants in the industry that assist global and local investors decide among the various options that the UAE offers, based on the investor’s budget, risk appetite, conceptualised brand positioning, human resource requirements, and/ or operating strategies.

With approximately 5000 companies operating out of this jurisdiction today, the free zone has experienced phenomenal growth since its inception in 1995. Over the years, SAIF zone has especially built an enviable reputation as a leading cargo hub, offering high frequency cargo flights more than 75 destinations in the Commonwealth of Independent States from the Sharjah International Airport. Perhaps the most attractive feature about this zone is the fact that it is strategically location and proximity to Dubai, six international UAE airports, seven major seaports, a network of roadways, while at the same time providing world-class facilities, excellent infrastructure and enabling profitable accessibility to low-cost labour and budget accommodation.

tax exemption, exemption from corporate and personal income taxes, exemption from all commercial levies, and a guaranteed 25 year lease renewable for a similar period. From virtual desk options to high quality insulated warehouses, SAIF zone provides a range of packaged licence options with a wide choice of facilities that would benefit investors and also offer optional value-added amenities, such as conference facilities and secretarial services. The free zone is a cost effective option for clients who are setting up businesses in the UAE for the first time, with minimum paperwork. In comparison to setting up a local company that requires 51 per cent local ownership, the 100 per cent foreign ownership privilege offered by SAIF Zone is an attractive feature. SAIF Zone has also made the share capital deposit optional. This has been an advantage to investors that do want to block money in the company’s bank account, but use it for business growth.

Cecilia D’Cunha is the founder and director of Zenesis Corporation, a boutique firm that specialises in incorporation of companies, setting up entities. She has over 20 years’ experience on 3 continents having established over 250 corporate structures for clients.

SAIF Zone offers 100 per cent foreign ownership, repatriation of capital and profits, import and export

Hospitality insight ❘

‘Mixing business with pleasure’ The Intelligent SME (TIS) recently caught up with Mustafa Ainen (MA), general manager of Media Rotana, Tecom. TIS: The Department of Tourism and Commerce Marketing recently announced in a recent event that tourism revenues have risen. What is your take on this scenario and how has this been reflected in the Media Rotana? MA: In recent months, we have seen the market taking many positive steps to real recovery. The year-todate occupancy figures witnessed great improvement year on year in the sheer number of visitors and guests staying in Dubai hotels. Looking at room occupancy, RevPar, and room revenues, we see an increase of more than10 per cent in comparison with the same period during the last year, and this is very encouraging indeed. TIS: What are the events that are held at the hotel, and what is the sector that you cater to most – MICE or tourism? How is this hotel a valuable MICE destination? MA: Media Rotana is a first class corporate and MICE hotel. With easy access to Jebel Ali Free Zone, Dubai International Convention and Exhibition Centre and only a 30minute drive from Dubai International Airport, leading organisations in Dubai consider Media Rotana as their preferred meeting and conference venue. With 15 meeting and conference rooms, all with day light, first class audio/visual equipments, WiFi high speed internet, top class food and beverage facilities, we are perfectly positioned to serve the market in our vicinity. In addition to these facilities, many MICE delegates now opt for an

extended weekend stay at the end of a working week where their spouses and children join them for a leisure weekend. The hotel is only five minutes from the Mall of the Emirates, Ski Dubai and Ibn Battuta Mall. Shuttle buses to four shopping malls operate from the hotel several times a day. To meet this increasing demand for leisure breaks for those conference delegates, we have designed an affordable weekend package, so now we are literally mixing business with pleasure!

In 2010, over 200 Dubai and overseas based corporate organisations produced over 100,000 room nights in the Media Rotana. TIS: What is the position of the Media Rotana in the current market? MA: Ever since its opening in the latter half of 2008, Media Rotana positioned itself as a leading corporate and MICE venue. In 2010, over 200 Dubai and overseas based corporate organisations produced over 100,000 room nights in Media Rotana, making it one of the leading corporate, conference and meeting hotels in this side of the city. TIS: What are the future plans of the hotel to increase the number of guests and visitors? MA: We have an active sales and

Mustafa Ainen (MA), general manager of Media Rotana, Tecom

marketing team who work diligently towards increasing the number of guests and visitors. The Rotana area sales office with 40 strong sales managers along with our in-house business development team ensure our clients in Dubai and elsewhere are well looked after. While ensuring that we maintain and increase the number of guests in our current portfolio, it is our goal to further penetrate the market and ensure that our finger is on the pulse of the market. TIS: What is the position and purpose of the Media Rotana, with respect to the many hotels of the Rotana group? MA: Rotana hotels currently operate 18 hotels in Dubai and Northern Emirates. Each of our hotels is unique in its position, location, and the market it serves. Media Rotana is a leader among other hotels in the corporate and MICE segment, and we will continue to support our clients in this part of Dubai. TIS: How have you been able to channel your vast experience towards the betterment of the hotel? MA: I was fortunate enough to have seen it all since I opened Rotana’s first hotel in Dubai back in 1995. I believe that only through people and their dedication to customer service, attention to detail and a passion to serve, can hotels meet the expectations of their ever-increasing guests and visitors.

Regional insight ❘

SME partnerships and Egypt’s experience Governments must engage young people in the economy and help them connect to big business and to government tenders. Trevor Lloyd-Jones talks with SME expert Dr. Nabil Shalaby.

he use of partnerships by government, for example linking universities and tech parks, or business incubators, scholarships or training organisations is a common strategy used to stimulate entrepreneurship. Interestingly, what you find when you look under the surface is that young businesses in Europe tend to take a sideways look at what a government can do for them; they have an expectation that institutions will help them, whereas in the Middle East, the issues surrounding entrepreneurship are different, while government help is still evolving. Because most small businesses fail within their first five years of

operation due to undercapitalisation and lack of proper management facilities, governments have a role to provide an environment and facilities where they can access government contracts, public and private resources, skills and finance during the critical stages of development. Dr. Nabil Shalaby promotes entrepreneurship in Egypt and Saudi Arabia as a consultant, manager, innovator, educator and author. He has developed and run support programmes for small businesses and helped start high-tech incubators. Dr. Shalaby managed the first technology incubator hosted by a university in Egypt. “I was the first manager of a technology incubator inside a university campus in Egypt, more than 12 years ago. That incubator model had played a vital role in promoting public-private partnerships,“ says Dr. Shalaby. “It was the first and the only technology incubator hosted by a university in Egypt providing dayto-day leadership to the startup entrepreneurs and incubating facilities and services. Prior to that, I was working with the Canadian Small and Medium Business Support Project in Mansoura, Egypt, which provided advisory and consulting services to hundreds of manufacturing SMEs and start up entrepreneurs in Egypt. “I believe that my present activities in the field of small and medium enterprises

Dr. Nabil Shalaby

development in the Arab world will give an impetus to the development of SMEs through PPPs since Arab countries have realised that SMEs need government support to grow. I hope that Egypt’s SMEs will also benefit from my ongoing work and projects after the radical political changes which swept through Egypt and some other Arab countries.” Entrepreneurs can find support in business incubators of different types to access awareness of their sector and to share resources. The first type is mixed use, meaning that they serve a variety of industries. Technology incubators target clients involved in creating and commercialising new technology or at least in laying infrastructure for new technology. The third type involves a smaller number of socalled ‘empowerment incubators’. These facilities focus on clients considered underprivileged or underserved with specific needs or social objectives. We wanted to know, from Dr. Shalaby’s experience, how important is it to connect the young generation and entrepreneurs to business in this new evolving era for Egypt? “I attach utmost importance of connecting the young generation and entrepreneurs to the business in line with the desire of young people for employment and sustainable

Regional insight ❘

“In a recent article, I proposed my recipe to foster entrepreneurship in the Arab world, and this can be applied to Egypt too,“ says Shalaby.

economic growth of the country,“ says Dr. Shalaby. “The young generation in Egypt is the source of power which should be utilised by engaging them in businesses and in other economic activities after providing them with proper training in the new world of technology. Now, the new Egypt was born on January 25, 2011. The talented young generation led the revolution with their entrepreneurial spirits and attitudes. It is crucial for economic and social reasons to use and benefit from this spirit, especially if we remember that 40 per cent of the Egyptian population is between the ages of 15 and 30, and recognise the change that has come to Egypt is mainly sparked by new technology, Internet, satellite, mobile phones, and social media. “Some people considered it as the first Facebook or Twitter revolution,“ says Dr. Shalaby. “I felt proud to see the cabinet, prime minister and the military of Egypt have Facebook pages and correspond directly with Egyptian citizens. I am optimistic to see the change will lead to a blossoming of millions of young generation entrepreneurs, who are eager to start new businesses. The absence of corruption and nepotism will create a revolution of entrepreneurship and innovation. I do hope in the next six months, we get a transition towards a democratically elected parliament and president.” All around the Middle East, chambers of commerce and other promotional

bodies are involved in conferences and workshops to study successful formulas for promoting SMEs. In many countries incubators are run for universities and research organisations to commercialise their products. And if we think of the transformation of the UAE, the use of government seed capital to attract the best hospitality, media and tech companies is one of the best examples of clustering and economic transformation to be seen anywhere in the world. “I think the centre point of technology innovation is the university’,“ says Dr. Shalaby. “For this reason I am fully convinced that we have to invest in the entrepreneurial ideas conceived by the university students. When I participated in the presidential summit on entrepreneurship at Washington DC I presented a paper at the George Washington University, School of Business, on an innovative model for commercializing entrepreneurial ideas with the support between universities and technology incubators for the ME, MENA and WANA universities. “For sure, universities in the new Egypt can play a major role in this regard, especially if they adopt a revolutionary educational system and curricula. Even as there is almost no cost-benefit of incubators and other types of government initiatives we can understand that they are extremely successful in restructuring most economies.

“Some of my proposed measures assure that entrepreneurship education and training should be introduced in all regions and remote areas. There is also an urgent need of launching one-stop-shops for entrepreneurs to facilitate licensing and access to information and setting up affordable incubation facilities in every city to enable business registration in less than a week. There will also be facilities to provide equity funding with flat rate, provide credit guarantee programs with no collaterals, facilitate customs procedures and increase the period of tax exemptions, especially for knowledge-based companies, enable technology transfer and localization and offer technical assistance to incorporate technology in all sectors. “SMEs should be supported to benefit from the huge business opportunities by networking with giant companies and by providing advice, guidance and mentorship services electronically from the experts of various expertise in all investment sectors. Collectively, we can make an impact, and help ensure that entrepreneurship will make its remarkable progress in Egypt, so that future generations will see their dreams come to life.”

Trevor Lloyd-Jones is an analyst and commentator on Middle East business and emerging markets for many years. He is also publisher of The Luxury Project, a community and news site for the luxury goods world and continues to write for publications on investing and economy.

❘ Leadership

Time management is a myth Changing the way we think about time is the first step to reduce the stress in our lives, writes Anesh Jagtiani.

’m sure you’ve attended courses and read books on time management, where you would make a list, prioritise, do the important, urgent, and not-soimportant and so on, and then finally get down to accomplishing the tasks mentioned on the lists.

While this system is good, the question is, do you really feel fulfilled after completing the task? Just completing a to-do list does not mean that you are managing your time well. Activity does not equal accomplishment. Activity with a clear outcome and purpose is what results in accomplishment. Is there a better way to manage time and feel the sense of accomplishment? To start with, we need to change the way we think about time and the tasks to be accomplished before beginning an activity. Lack of fulfillment is not caused by poor working habits, but by poor thinking

habits. So the way we think about time and tasks to be accomplished is more important than the tasks itself. I believe there are three steps to manage time and feel accomplished: Firstly, before you plan your day, start by asking yourself the three most important outcomes to be accomplished to reach your goals. The key word here is outcome and not tasks itself. Tasks are meaningless, without outcomes. Secondly, think of the purpose of the outcome, it answers the question “why?” This is followed by the third step which is making a to-do list that gives the outcome you require. Let’s look at a real life example to illustrate this point. I got a call from a client to conduct a training session for a group of 30 people on “how to communicate more effectively and get the best out of your employees.” So, before I

rushed out to prepare for this session I focused on the outcome. The desired outcome was - have a highly impactful training session with the group and enjoy the process. The reasons to bring about an outcome are to feel good, to connect, to understand challenges and have a lot of fun. To achieve this outcome we need to make a to-do list. The to-do list just helps me achieve the outcome and this cannot be attained without the desired FOCUS. Now, if I were to start working on this project, the only thing I focus on, is the outcome, which is: “have a highly impactful training session with the group and enjoy the process.” Focusing on outcomes is easy for the brain to do, as opposed to focusing on the hundred to do’s. If I have to work on the to do list, I would get stressed as there are more than 50 things to do. The point is the thinking before the doing, which is more important than the doing. Activity without a purpose leads to stress. Activity with a clear outcome and purpose leads to fulfillment. Does that make sense? At the end of the day, time management is a myth. You can’t really manage time. Time is something you cannot control. What you have to really manage is, you. Your fulfillment and your emotions. All that stems from a clear outcome and a purpose. To your success!

Upcoming Events ❘

Events Calendar May-June 18th Arabian Travel Market Exhibition 2011 Date: May 2 - 5, 2011 Venue: Dubai International Convention and Exhibition Centre. Arabian Travel Market is the industry’s leading travel and tourism exhibition encompassing four days of intensive meetings, seminars, press conferences and social networking opportunities. www.arabiantravelmarket.com Interiors UAE Date: May 9 - 11, 2011 Venue: ADNEC, Abu Dhabi Contract and Retail Interiors Exhibition, offers an excellent platform for interior and exterior furnishing companies to showcase their products to a market that is rapidly expanding. www.interiorsuae.com Aluminium Dubai 2011 Date: May 9 - 11, 2011 Venue: Dubai International Convention and Exhibition Centre The leading exhibition for aluminium products, technologies and investments in the Middle East. www.aluminium-dubai.com Hardware & Tools Middle East 2011 Date: May 10 - 12, 2011 Venue: Dubai International Convention and Exhibition Centre Halls 6, 7, 8. The region’s only trade exhibition for tools, hardware, materials and machinery. www.hardwaretoolsme.com Garden and Landscaping Middle East 2011 Date: May 10 - 12, 2011 Venue: Dubai International Convetion and Exhibition Centre The 8th edition of Garden+Landscaping Middle East is the region’s only dedicated international trade fair for the garden, landscaping and outdoor living industry www.gardeningexpo.com Dubai International Property and Investment Exhibition Date: May 10 - 12, 2011 Venue: Dubai International Convention and Exhibition Center. International Property Investment Show is a major networking

and transactional event where deals worth millions of dollars are concluded. The show brings together high net-worth individuals, commercial and residential investors and specialised visitors from the property industry including trade delectations. This year, the show will include banks and financial institutions, in addition to real estate companies and developers to enable visitors to conduct complete purchasing transactions within the event venue. www.interntionalpropertyshow.ae Infrastructure Investment World MENA 2011 Date: May 16 - 18, 2011 Venue: Shangri-La Hotel, Dubai The event brings together government, operators, developers, end investors and infrastructure funds under one roof to maximise return on investion from the surface and social infrastructure being developed to support economic growth. www.terrapinn.com Mecom 2011 Date: May 16 - 18, 2011 Venue: ADNEC, Abu Dhabi MECOM - Middle East Communications Exhibition & Conference is the leading Communications Technology & Solutions event head in Abu Dhabi. It is the only telecom event in Abu Dhabi, the only event for fixed and mobile communications in the UAE, the only event serving the whole communications value chain, the only event with a dedicated focus on enterprise communication. www.mecomexpo.com Cards Middle East 2011 Date: May 17 - 18, 2011 Venue: ADNEC Abu Dhabi The region’s smart cards conference and exhibition dedicated to providing you a definitive payments marketplace in the Middle East. www.terrapin.com Kiosk Self Service World Middle East 2011 Date: May 17 - 18, 2011 Venue: ADNEC, Abu Dhabi Kiosk Self Service World will highlight case studies from the region and showcase solution

providers that are making this happen. www.terrapin/2011/kss Mobile Money World Middle East 2011 Date: May 17 - 18, 2011 Venue: ADNEC, Abu Dhabi Mobile Money World 2011 brings together leading financial institutions, telcos, retailers and service providers. They will meet to discuss strategy and source solutions in the m-payments arena. www.terrapinn.com The Office Exhibition 2011 Date: May 17 - 19, 2011 Venue: Dubai International Convention and Exhibition Centre. The Office Exhibition is the Middle East’s largest one-stop shop for the leading suppliers of office furniture, technology, consultancy, design and fit-out - featuring groundbreaking new technologies for the office industry. www.theofficeexhibition.com The Hotel Show 2011 Date: May 17 - 19, 2011 Venue: Dubai International Convention and Exhibition Centre. The Hotel Show is the largest and most important event for the hospitality sector in the region and beyond. The show features a comprehensive range of the very latest products, services and technologies and attracts key industry decision makers across the territory. www.thehotelshow.com Facilities Management Expo (FM Expo) 2011 Date: May 17 - 19, 2011 Venue: Dubai International Convention and Exhibition Centre. The essential event for property and facilities management professionals. www.fm-expo.com Mastering International Oil & Gas Accounting Date: May 23 - 26, 2011 Venue: Traders Hotel, Dubai This four-day course focuses on the accounting issues currently faced by the upstream oil and gas industry. It considers the accounting and financial reporting implications of all the main transactions

❘ Upcoming Events

Events Calendar May-June undertaken in the upstream business, including cost allocation and capitalisation, revenue allocation and the accounting issues faced by joint venture operations and operators of concessions and PSC’s. www.neo-edge.com China Sourcing Fair 2011 Date: May 31 - June 2, 2011 Venue: Dubai International Convention and Exhibition Centre. Export-ready suppliers from mainland China, Taiwan and Hong Kong will offer an extensive array of stylish fashion accessories to more buyers in the Middle East’s trading capital. www.tradeshow.globalsources.com India Sourcing Fair 2011 Date: May 31 - June 2, 2011 Venue: Dubai International Convention and Exhibition Centre. The Fair provides an ideal platform for buyers in the Middle East and

nearby North African markets to meet potential supply partners from India. Export-ready suppliers from India will offer products in various industries to more buyers in the Middle East’s trading capital. http://tradeshow.globalsources.com Airport Show Date: May 31 - June 2, 2011 Venue: Airport Expo The Airport Show is supported by leading international industry associations and local government authorities.The Airport Show offers an unrivalled combination of highquality networking and business development opportunities through a series of roundtable discussions, innovation and project seminars and the hosted buyer programme. www.theairportshow.com The Middle East Event Show 2011 Date: May 1 - June 2, 2011 Venue: Dubai International Convention and Exhibition Centre.

The Middle East EVENT Show is the perfect platform for MICE, Events and Entertainment suppliers and buyers to connect in the Middle East. The most comprehensive range of services will be on display including event management, service providers, equipment rental, support services, venues, entertainers, media, ATL & BTL marketing services and much more. www.me-eventshow.com Automechanika Middle East 2011 Date: June 7 - 9, 2011 Venue: Dubai International Convention and Exhibition Centre Halls 1, 2, 3, 4, 5, 6, 7, 8, Dubai The event covers the full range of parts for motor vehicles, as well as components for the drive, chassis, body, electrics and electronic groups, equipment for vehicle service and repair, bodywork repair and painting, tyres, batteries and performance systems. www.automechanikame.com

Letters to the Editor Dear E ditor, Dubai S ME co mmend SME. A s the la ny cha unch o n nel tha f The In inform t dissem telligen ation a inates t n d d is SME – SME s c u s s e s related ector is the sta c te e rt o a f dissem inly po the UA sitive. M ination E point, w ore tha can als n being e h o o draw pe that a in the m “The In to be a arket’s telligen ddress fe t SME” e ed to e dback SME s on wha nhance ector. W t a n n e d e enable ds e, there in their the UA fore, en though E/Duba courag ts and i e of “The re views to aders to Intellig help de writeent SM e conten p en the E,” as it t and k quality continu nowled ally imp all SME ge dev roves stakeh elopme olders. nt for th e bene fit of Alexan dar Wil li a ms Directo r Strateg y and P olicy D Dubai S ivision ME

If you want to air your views, write to; The Editor, The Intelligent SME P.O. Box 89735, Dubai, UAE Fax : +971 4 2690566, 2651708 E-mail: editor@spiholding.net

Dear Editor, I am eagerly looking forward to reading your first edition. Being a well wisher, and also an entrepreneur who runs a small business in Dubai, I represent a community that toils very hard for the economy of this country. Sometimes we feel neglected, but now I’am confident that we have a forum, which will allow us to express our problems. Of course, we will also share our success with you and the rest of the community in the country. I commend your approach of involving the SMEs in the UAE into contributing articles to your magazine. I wish you all the very best for many more editions of The Intelligent SME in the future. Yours sincerely, M. Ahmed

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Column ❘

No fruit without a seed Utpal Bhattacharya’s quick paint brush of what needs to be set right in the loan market for small businesses.

just met the director of a small enterprise in the UAE. An expatriate, she has been in the country for nearly two decades. Her business deals with information and media and so, in sheer numbers the turnover of the company is not large, but the bottom line is quite attractive. Return on investment is anywhere between 30 and 50 per cent. But here is what she has to say about banks whenever she has sought a business loan: “They will not lend to my business even against assets that I hold through them. And all this, because, I presume, bankers do not understand my business, and nor would they try to. They are happy to make money on what they know and are comfortable with.” Such a statement, of course, is too broad brush, but still, it is not a great endorsement of the banking industry in the country. Another recent incident that I want to narrate here is quite a bizarre one. The owner of a services company, in the telecom sector, once told me about a banker’s refusal to give him an overdraft against his own investments totalling over AED1 million with an international bank. These deposits were in the bank’s own proprietary funds. The relationship

manager, apparently told this small business owner that the overdraft would cost him 22 per cent per annum if he still insisted on getting it. When the latter asked why it would cost him so much money to get a fully secured overdraft, the banker quipped, wisely: “Sir, because you have invested in our equity funds, and, as you know, the equity market is a volatile market. If you had kept your money in our term deposit schemes, we could have done an overdraft cheaper.” It is another story how the same business owner decided to take out his investments and money from this international bank to only land in another bank, which was no better. The above stories are not the exceptions, but they are some sort of a pattern, which dissuades small business owners of even trying to approach a bank for loan. Forget business loans, a small business owner can find it extremely difficult to get his application for a personal loan approved by a bank. The same bank might sell a personal loan to the business owner’s employees, but not to the owner. The reason for this attitude is generally attributed to fact that a business owner “does not earn a salary”. Again, not a very logical reason to an outsider, but for risk managers at banks, their banking logic is simple and boils down to the fact that an employee earns a routine salary, a certainty; while an entrepreneur lives on his profit, which has quite a degree of uncertainty. What I

fail to fathom with this logic is that if an entrepreneur cannot make profits, how will he pay his employees? Hello! Can, anybody answer me? Last but not the least, and before I stop making any more fuss about what is not right, I want to draw your attention to the theory most experts subscribe to these days about the need for a universally accepted credit bureau in the country. Most say that a credit bureau will improve the local credit market by miles from what it is today, and that its biggest beneficiary will be small businesses, apart from individual borrowers. I have my own reservations, though, and neither do I feel it is that simple a matter. I do not expect bankers and the rest of credit market to change overnight, credit bureau or no credit bureau. Instead, I would say that there is a need for re-training the minds of those people who run the day-today affairs in the country’s credit market. They have to learn to give due cognisance to what is still small and recognise the business potential in them to make any meaningful change to the nation’s credit market. After all, enterprises like Research In Motion were not born large, neither was Hotmail and nor was Google. The rise of these initiatives to glory was not just because of their uniqueness, but also because investors backed them with capital. So, my last word for this edition is that if you want to eat a fruit, you have to trust and back a seed first. Bankers and financiers are you listening?