Sharjah increases support for start-ups and SMEs

Efforts to expand the role of entrepreneurs and small-scale enterprises in Sharjah are gathering momentum, due to a combination of regulatory changes, new incentives and supporting infrastructure.

At the end of November the government announced plans to award 10% of all projects linked to its “Digital Sharjah” programme – which aims to migrate all government services online – to start-ups and small and medium-sized enterprises (SMEs).

The move, which was announced at the inaugural Sharjah Entrepreneurship Festival, a gathering of government officials, industry professionals and potential investors, forms part of a broader bid to encourage small-scale businesses to develop innovative products and services.

Opportunities for new business development were given a further boost last November, when multinational venture capital (VC) firm Crescent Enterprises (CE), which is headquartered in Sharjah, announced plans to launch a VC unit that will focus on strategic direct investments in start-ups.

CE said in a statement that it is looking to invest up to $150m over a three-year period, with at least half the funding earmarked for projects in the MENA region. The firm identified technology, trade, power, health care, logistics and general infrastructure as sectors ripe for investment.  

Business-friendly environment taking shape

The government is working to encourage growth in start-ups and small businesses as part of plans to boost the private sector’s role in the economy.

In recent months it has developed new free zones and streamlined business registration processes, encouraging the launch of new enterprises, according to Najla Al Midfa, general manager of the Sharjah Entrepreneurship Centre, a not-for-profit government organisation tasked with supporting locally based entrepreneurs through launch programmes and accelerators.

“The licensing environment for start-ups and new SMEs has changed significantly in the last few years, with the addition of three new free zones over the past 12 months,” she told OBG. “Working closely with these bodies will help provide start-ups with access to both well-established commercial zones and the local market in the UAE.”

A move to simplify incorporation procedures for start-ups based at the emirate’s free trade zones through initiatives such as fast-tracked and low-cost company registration, together with other forms of support, has played a key part in bolstering growth among new businesses.

Enterprises are also benefitting from the close links forged between universities and entrepreneurial development agencies.

AUS Enterprises, the investment and business arm of the American University of Sharjah, is developing the Research, Technology and Innovation Park, a free zone supporting knowledge-led ventures and SMEs. Facilities will include labs and research centres, providing start-ups with key hard infrastructure and a supportive environment.

Free zones and support mechanisms yielding results

The move to encourage innovation and new ventures appears to be having a positive effect on the broader economy.

In mid-December ratings agency Moody’s reaffirmed the emirate’s “A3” long-term issuer rating and maintained a stable outlook in its latest assessment of the local economy, forecasting GDP to expand by 2.7% in 2018 and 2019.

In its analysis, Moody’s said the government’s efforts to foster a private sector-led growth model had helped to develop and maintain this position of strength and stability. It also described the state-backed development of free trade and dedicated industrial zones, which support start-up and SME initiatives, as drivers of growth.

Private sector recognises value of entrepreneurs  

The growing awareness of the importance of start-ups to the economy has been accompanied by a shift in attitudes within the private sector, according to Khawla Al Serkal, director-general of Sharjah Ladies Club, a government organisation that supports skills and talent development for local women and youth.

“The mindset of business is changing in line with new trends, and now everyone recognises the value in start-ups to create sustainable and inclusive economic development, particularly for young people,” she told OBG.

This has led some corporate entities to take an active role in the development of small businesses during the incubation stage. One such company is Air Arabia, which has been providing funding to start-ups and SMEs in aviation or tourism.

Developing microfinance would support further growth

However, while more opportunities are opening up for small operators thanks to firms such as CE and Air Arabia, the sector still faces challenges in securing early-stage financing from banks and equity investors, including angel investors, who still need more awareness and education on this asset class, according to Al Midfa.

“The UAE is now starting to develop the environment for investment in start-ups, but more needs to be done to improve access to venture capital for early-stage funding,” she told OBG.

Further developing the emirate’s microfinance offerings and promoting the benefits of emerging companies have been suggested as possible ways to increase venture capital grants and investment in small operators.

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