The Bahrain British Business Forum (BBBF) has seen a surge in enquiries from small and medium-sized enterprises (SMEs) both from the UK and the Middle East over the past 18 months.

One of the reasons is the reduction in government budgets, certainly on the European side, to assist SME investment into the Middle East. Their focus has shifted to landing big-ticket mandates and projects through established names and brands.

The queries we receive are varied. Entrepreneurs who are setting up or coming into the market are interested in knowing where the opportunities lie, and what the potential risks are. From those already operating in the region, we receive both gripes and questions about operational, logistical, financial, development and human resource-based issues and so on.

In the future

So what is the outlook for SMEs in the Middle East?

From an in-country point of view, the family business that is core to the success of trading and business in the Middle East derives originally from SMEs. Governments see increasing value in SMEs and there is support available through various economic development boards and at governmental level. Policymakers are keen to encourage a new generation of businessmen and women. The drive at government level is to make it easier for people to set up and run their own businesses.

The reality, however, is that SMEs take time and effort to establish. Achieving sensible and then sustainable growth in the increasingly competitive GCC markets is difficult. These businesses need all the help they can get if they are going to successfully take root.   

On 11 April 2017, Bahrain promulgated Legislative Decree No 84 on regulating the activities of business incubators and accelerators. A clear mandate has been set and achieved by Minister for Industry, Commerce & Tourism Zayed bin Rashid al-Zayani. His message to the market is very clear: develop business ideas, go out there and start your own business. In addition, a fund of $100m for SMEs has been planned by the government.  

In Doha, the Chamber of Commerce ran its second SME conference earlier this year. Its focus is to increase its drive for inward investment. The points raised at the meeting involved developing creative thinking and innovative ideas coupled with international best practice and standards.

From an outside, inward investment point of view, things have changed. Certainly on the UK side, the network for support and assistance for SMEs sits off from the traditional government or embassy set-up more so now.

There are a variety of entities throughout the region geared up to support queries from SMEs. Besides the BBBF, there is the Qatar British Business Forum, the recently established Kuwait British Business Centre, and the long-standing British Business Association in Saudi Arabia to name a few.

Market views are mixed at present, however. Some SME owners in the region say the regional governments and embassies should do more to help and assist SMEs. Others think SMEs themselves are responsible for developing their business.

But there is no doubt that small businesses are operating in a tough environment.

Government austerity measures have cut public sector spending and liquidity in the region, while additional pressure is coming from volatility in the world’s currency markets.  

Banking ties

One of the biggest factors affecting SMEs, however, is the relationship between SMEs and their banks. Some lenders have removed themselves entirely from the SME market. Others, at best, are looking to reduce their risk and exposure when working with SMEs.

The road ahead is still unclear and small businesses face huge challenges and risks

Where SMEs looked to diversify their business activities, the banks saw a new risk on the compliance front. SMEs say they have been unfairly tarnished. The banks say they have no choice but to take seriously what they view as a heightened commercial risk.

Governments in the UAE and Bahrain are introducing new bankruptcy laws that should make life easier for those SMEs that do not manage to establish sensible, sustainable businesses over the long term rather than facing the myriad issues they have historically faced when looking to exit.    

SMEs have been placed at the heart of the region’s economic agenda, but the road ahead is still unclear and small businesses face huge challenges and risks. It is vital to the region that its small firms are able to thrive, and governments should continue to encourage SMEs by making it easier to set up and do business.