Updated: Sep 29, 2024
Dubai's lifeblood is the combination of small and medium-sized enterprises(SMEs). They are the small and medium enterprises that produce energy for them. SMEs are the backbone of the emirate's diversified economy. The following are some key data that underscore the nature and importance of these enterprises:
These whopping numbers reveal that SMEs undoubtedly fill a significant void when showing entrepreneurship and innovation in the emirate.
This study is credible based on a well-documented report submitted by Dubai SME. The report's methodology is as follows:
Concentration on economic performance having successes and failures shown in deep detail
Survey forms were taken away from 500 SMEs of three categories, which are:
In this blog, we will explore different aspects of SMEs in Dubai, such as their financial health, profile, business outlook, and the kind of government support that they receive.
In 2009, SMEs were defined in the UAE, and such a definition was set up through Dubai SME, which was part of the Department of Economic Development (DED). The definition categorizes businesses based on employee numbers and annual turnover. Such a definition varies from sector to sector, such as trading, manufacturing, and services. For example, assuming that a micro-enterprise is defined to have less than 9 employees and an annual turnover of AED 9 million or less, then the turnovers of medium enterprises in the manufacturing sector will be capped at 250 employees with turnover not exceeding AED 250 million.
Sector | Micro (Employees/Turnover) | Small (Employees/Turnover) | Medium (Employees/Turnover) |
Trading | ≤9 / ≤AED 9 mn | ≤35 / ≤AED 50 mn | ≤75 / ≤AED 250 mn |
Manufacturing | ≤20 / ≤AED 10 mn | ≤100 / ≤AED 100 mn | ≤250 / ≤AED 250 mn |
Services | ≤20 / ≤AED 3 mn | ≤100 / ≤AED 25 mn | ≤250 / ≤AED 150 mn |
Source: (SME Report)
Dubai's economy has grown remarkably over the last decade due to diversification in trading, tourism, and real estate. The government's proactive policies have helped the SME sector grow and contribute considerably to the overall economic output.
Sector | Contribution to GDP | SME Contribution to the Workforce | SME Contribution to GDP |
Trade | 30% | 33% | 47% |
Services | 57% | 51% | 41% |
Manufacturing | 14% | 16% | 13% |
Source: (SME Report)
Small and medium enterprises constitute a vital share of Dubai's business landscape. Indeed, 95% of all establishments are SMEs. Of these SMEs, 72% assume the form of micro-enterprises. The percentages for small- and medium-sized enterprises are 18 and 5, respectively. The largest shares of SMEs are found in the trading sector (57%), services (35%), and manufacturing (8%) (SME Report).
SMEs account for 40% of the Gross Domestic Product and 42% of total employment in the Gulf Emirate. The importance of such firms is high, as though they directly contribute to a large portion of the economic output, their labor productivity is relatively low compared to large enterprises. For instance, medium-sized firms indicate higher productivity at AED 244,785 per employee, while that indicated by micro-enterprises is AED 91,080 (SME Report).
Enterprise Size | Labor Productivity |
Micro | AED 91,080 |
Small | AED 138,058 |
Medium | AED 244,785 |
Source: (SME Report)
A financial analysis of 307 SMEs across Dubai reveals healthy profitability margins, particularly in the manufacturing sector, where operating margins range from 10-20%. Service SMEs show 12-25% operating margins, particularly in business services. Trading SMEs also demonstrate solid financial health, with the building materials segment showing net margins between 10-14%.
Sector | Gross Margin Ratio | Operating Margin Ratio | Net Margin Ratio |
Manufacturing | 30-40% | 10-20% | 7-18% |
Services | 30-70% | 6-25% | 2-20% |
Trading | 7-40% | 3-15% | 2-14% |
Source: (SME Report)
State and characteristics of SMEs in Dubai were assessed based on a survey of 500 SMEs across sectors such as Manufacturing, Trading and Services. The survey focused on assessing the state and characteristics of SMEs along certain key themes presented in Figure:
Source: (SME Report)
Dubai's SMEs are outward-oriented, with 51% exporting. The trading sector is the most internationalized, with 68% of the trading SMEs receiving revenues from international markets (SME Report).
Innovation remains low among Dubai SMEs, with only 13% reporting the implementation of innovations. Manufacturing SMEs show a higher focus on innovation (29%) compared to trading (4%) and services (16%) (SME Report).
IT adoption is moderate, with 21% of SMEs utilising advanced systems such as ERP and CRM. Service-based SMEs lead the way in IT sophistication, with 26% using enterprise-level IT systems (SME Report).
Service SMEs focus the most on human capital, with 30% offering comprehensive training programs and performance evaluations. However, only 25% of SMEs across sectors have a dedicated human resource department (SME Report).
Corporate governance remains challenging, with just 18% of SMEs adopting key governance principles such as audited financial statements or advisory boards. Larger enterprises are more likely to implement formal governance structures (SME Report).
Access to finance is moderate, with 23% of SMEs securing bank financing in the last five years. The trading sector has the highest level of access, with medium-sized firms showing a higher propensity to obtain financing (SME Report).
Dubai’s SMEs have moderate scalability potential, with 19% of firms demonstrating high scalability. Manufacturing SMEs lead in this category due to higher capacity utilisation and growth expectations (SME Report).
Optimistic business outlook in Dubai for SMEs. In Q3 2013, the BCI of SMEs registered a very optimistic level at 119.5 points. Expectations are optimistic, with future growth expected to be positive. Many SMEs focus strongly on market expansion. Over the next five years, 70% of the SMEs expect medium-to-high product demand growth (SME Report).
Dubai offers a robust support ecosystem for SMEs. Key government initiatives include access to financing, business advisory services, and opportunities for networking and collaboration. In collaboration with other entities, Dubai SME is central in offering programs to develop the SME sector. These initiatives help SMEs overcome innovation, corporate governance, and scalability challenges.
The small and medium enterprise sector is very important to the economic growth in the emirate, supplying a substantial fraction of the GDP and directly contributing towards employment. Nevertheless, weak areas have to be improved, particularly productivity requirements that need betterment, innovation levels that must improve, and corporate governance practices. Given this backdrop, the general prospects of Dubai SMEs look bright. Strong governmental support through access to finance, advisory services, and growth programs will make Dubai SMEs look well-geared for continuing success. Scale sustaining and competition edge improvement can be enhanced by focusing on technology adoption, international expansion, and business process improvements.
95% of all businesses in Dubai are SMEs, which puts focus on the value that these players add to the economy.
Most SMEs operate in the trading sector (57%), followed by services (35%) and manufacturing (8%).
SMEs constitute around 40% of Dubai's aggregate GDP.
SME faces low productivity, low adoption of technology, and gaps in corporate governance.
Dubai has undertaken various government initiatives to support the SMEs. One is access to financing. Another is business advisory services. There is also networking opportunities.