As Dubai prepares to host Expo 2020, the largest event ever staged in the Arab world, UAE-based trade finance banks are seeing opportunities to support more small businesses.
Emirates NBD, for one, has rolled out a new banking package for UAE SMEs and startups involved in Expo 2020.
The package includes preferential pricing and privileges on transactions, working capital, trade finance, foreign exchange and commercial loans, which will be available for entities registered on the Expo 2020 Online Marketplace (OMP).
Expo 2020, which will be hosted in Dubai between October 2020 and April 2021, is a world trade fair that gives nations and companies from around the world the opportunity to showcase their ideas, inventions and achievements. It is expected to attract no less than 25 million visitors from 192 countries to Dubai over the six-month period.
One segment labelled as the big winners of the event is small businesses, with organisers committing to awarding 20% of the value of all contracts to SMEs. The expo has already taken a range of measures to support this ambition. In November 2018 it launched the OMP, a platform where companies from around the world can apply for business opportunities as part of the event.
The OMP is designed to increase the reach and visibility of SMEs in particular, enabling them to advertise products and services, connect with their peers and access business opportunities from local and regional suppliers, Expo 2020 and its partners, as well as international participants.
As of May 2019, over 32,000 suppliers from 151 countries had registered on the platform, with about 80% of them being SMEs, according to Tina Ghanem, director of OMP.
“All tender opportunities related to Expo 2020 are now posted directly to the OMP, and approximately 60% of our contracts have been awarded to SMEs,” she tells GTR. “Our intention behind creating the OMP was to help drive the internationalisation of SMEs. Any SME, whether based in the UAE or abroad, can benefit from Expo 2020.”
Another benefit, she adds, is on payment terms: SMEs supplying to the expo will be paid within 35 to 40 days, an improvement from the usual 60 days. Additionally, Expo 2020 does not require bank guarantees from SMEs to conduct business.
The users of the marketplace will now also be able to access financing and other banking services from Emirates NBD, which is the official banking partner of Expo 2020.
The bank’s “Expo 2020 Dubai Account” includes trade finance support for short-term financing requirements as well as working capital and commercial loans at “attractive terms”, it says.
Speaking to GTR for a recent feature, Sumit Aggarwal, head of transactional banking at Emirates NBD, said the bank had already started to see some increase in business ahead of Expo 2020.
He further noted that he expects Dubai trade to grow as a result of the event. “We are expecting to see growth in the economy, but it will be quite hard to estimate how much,” he said. “It will definitely add to the attraction of Dubai as a trade location. We expect it to contribute to growth in Dubai’s internal and external trade. That’s exactly why we are doing it.”
Other local trade financiers that GTR has spoken to are similarly exploring new opportunities for business growth around Expo 2020, including providing more support for SMEs that are part of the event’s supply chain.
“Those SMEs at the end of the supply chain have an opportunity now to receive finance against a purchase order – this is the kind of finance that they wouldn’t normally get, if they are high risk, without having been in that value chain. This is a proposition that we offer to the value chain in a project like Expo 2020,” said Reda Ezzat, head of trade and structured finance at Mashreq Bank, speaking on a panel at GTR Mena 2019 in February.
His comment is echoed by Birju Sanghrajka, head of trade for Africa and the Middle East at Standard Chartered, who says the bank is now doing a lot more in the medium-sized enterprise space, particularly for the contractors and sub-contractors supporting the larger Expo 2020 projects.
“One of the challenges that SMEs in the UAE deal with is generally the extended payment terms that they get from industry, government, etc. But with Expo 2020, given its strategic nature, we’ve seen the payment terms being pretty strict, and because there is more focus on this, we are a lot more comfortable supporting the SMEs, the MEs particularly,” he says.
In April, EY released a report on the economic impact of Expo 2020, finding that from 2013 (when Dubai won the bid to host the event) to 2031, the event and its legacy are likely to contribute AED122.6bn gross value added to the UAE’s economy, supporting 49,7000 full-time jobs a year in the country. During the event itself, the impact is expected to be equivalent to 1.5% of the country’s GDP, the report says.