DUBAI: The United Arab Emirates is drafting legislation to let small and medium-sized firms use machinery and other assets to back loans, in order to improve financing options for the firms, said a unit of the World Bank which is helping with the law.
The International Finance Corp is assisting the Gulf nation in preparing the law, which will create a registry of moveable assets, Mouayed Makhlouf, the IFC’s regional director for the Middle East and North Africa, told a media event in Dubai yesterday.
Once there is a formal record of the assets, which could include machinery and inventory, small and medium-sized enterprises (SMEs) will be able to use them as collateral; banks will be able to confirm they exist and take possession in the event of a default.
“You can only mortgage land once and a building once - so for these small businesses, after that, what else can they put up,” Makhlouf said.
SMEs often find securing bank finance challenging for a number of reasons, including their size and a lack of financial history on which banks could base lending decisions.
Reuters
