UAE drafting movable assets law, says IFC
Dubai, May 6, 2013
The UAE 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 movable assets, Mouayed Makhlouf, the IFC's regional director for the Mena region, told a media event in Dubai on Monday.
Once there is a formal record of the assets, which could include machinery and inventory, 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.
"This will be a game-changer for bank lending for the SME sector," Xavier Reille, a manager in the IFC's advisory services division, said at the same event, adding that the draft bill was currently with the UAE Ministry of Finance.
Seven other nations in the Middle East and North Africa, including Morocco, Tunisia and Jordan, are also working with the IFC to put the necessary legislative steps in place for movable assets, Reille added.-Reuters