There is a whole new mindset unfolding in the UAE on the financial front; innovative tech and business strategies are shaking up traditional funding methods for enterprises, especially small to medium-sized businesses at various growth phases. In the current business landscape, defined by endless shifts and turns, small to medium-sized enterprises (SMEs) play a crucial role. SMEs are more than just economic dynamos. They are hotbeds of innovation, churning out a steady stream of fresh ideas and inventive thinking. Nonetheless, getting finance on time is still a major hurdle. Invoice financing has emerged as an important means through which SMEs can access quick working capital using unpaid bills as security.
The future of invoice finance in the UAE is influenced by different trends that develop in the business landscape. As of mid 2022, the number of SMEs in the UAE stood at 557,000, constituting a contribution of 63.5 per cent to the non-oil Gross Domestic Product (GDP)[1]. Projections indicate that there will be about 1 million SMEs by 2030 in the UAE, and thus the necessity for invoice finance is expected to skyrocket as well. So, to keep up with the ever-changing business needs, lenders are getting creative. In a bid to keep pace with the constantly shifting business demands, it is clear that lenders are thinking outside the box. They are going beyond simply offering comprehensive financial packages – they are also sweetening the deal by including some extra goodies in there too.
The fintech scene’s growth in the UAE is seriously shaping up innovations when it comes to invoice financing. So, fintech companies have developed platforms designed to simplify and speed up the financing process, as well as invoicing, with the help of digital technologies. Their aim is to make the whole financing and invoicing process quicker and easier with technology.
Let’s not forget, there is a growing trend where businesses are leaning towards concepts like quick cash access, real-time updates and automated billing. These features make it a breeze for small to medium enterprises to tap into finance via invoice funding. According to a report by Mordor Intelligence[2], the UAE fintech market is expected to be worth around USD 3.16 billion in 2024 and can grow at a CAGR of 12.56%, reaching USD 5.71 billion by 2029, thus allowing technology innovation to revolutionize even more the invoice finance sector.
On top of that, new rules like the UAE Factoring Law from 2021[3], are all about beefing up both consistency and openness in how invoice financing is handled within the UAE. This law sets out to provide businesses with the necessary guidelines and roadmap to operate in a secure and regulated environment, promoting confidence among businesses and ensuring standardized practices. It helps increase transparency and trust among stakeholders, encouraging wider participation in invoice financing.
So, what does the future of financing look like for SMEs in the UAE? It seems pretty solid, and is fuelled by a few tech innovations, support from regulatory authorities and a surging market demand. By harnessing advancements in Artificial Intelligence, blockchain and fintech, businesses can optimize cash flow, drive growth and unlock new opportunities. With transparent regulations and fair game in play, invoice financing is on the brink of revolutionizing the SME sector in UAE – it is not just fuelling their aspirations anymore; it also carries immense potential to turbocharge the national economy.
References
[1] Small and Medium Enterprises (https://u.ae/en/information-and-services/business/small-and-medium-enterprises)
[2] Mordor Intelligence (https://www.mordorintelligence.com/industry-reports/uae-fintech-market)
[3] UAE Factoring Law 2021 (https://uaelegislation.gov.ae/en/legislations/1515)
