Why UAE start-ups struggle to get banked: Experts point to key gaps

Strong financial transparency, robust compliance practices and clear business documentation are increasingly determining whether start-ups and SMEs can open bank accounts quickly or face delays, experts said during a panel discussion at Ajman Free Zone’s Reset & Rise forum. The event was supported by Gulf News.

While entrepreneurs often view banking as a routine administrative step after obtaining a trade licence, lenders now assess businesses through a much wider lens that includes ownership structures, business activities, source of funds, financial reporting and regulatory compliance.

Panellists from the banking, accounting and taxation services sectors said businesses that embed transparency from day one are better positioned not only to establish banking relationships but also to access future credit and investment.

Banking starts with trust

From a bank’s perspective, the starting point is understanding risk.

“Banks are essentially trying to protect the amount of risk in line with central bank regulations, compliance requirements and sanctions frameworks,” said Rajeev Chalisgaonkar, Head of Business Banking and NEObiz at Mashreq Bank.

“Businesses that operate in relatively low-risk industries, deal with lower-risk geographies and maintain simple ownership structures are generally able to complete the onboarding process more smoothly,” said Chalisgaonkar.

“Equally important is the ability to provide clear, consistent information from the outset,” he said.

Many entrepreneurs, however, unknowingly trigger additional scrutiny. Industry exposure, international markets and ownership arrangements all influence a bank’s risk assessment.

“SMEs may not always realise that operating in certain jurisdictions could increase compliance requirements. Banks also face operational challenges because different trade licensing authorities follow varying KYC standards and documentation formats, making verification more complex,” he added.

While compliance is often perceived as the biggest obstacle, Hamed Amshan, Acting Head of Business Banking at Ajman Bank, said account-opening delays are more commonly driven by incomplete or inconsistent documentation.

“Delays are often related to incomplete or inconsistent documentation and information rather than compliance itself,” he said.

Businesses that clearly disclose their ownership structure, source of funds and supporting documentation are typically onboarded much faster, he added.

“When information is incomplete, banks are obliged to seek additional clarification, naturally extending the process.”

Amshan said enhanced due diligence is a standard part of the onboarding process that enables banks to better understand the businesses they serve and meet regulatory obligations.

Complex ownership structures, businesses where Ultimate Beneficial Owners (UBOs) are not easily identifiable, companies operating in cash-intensive sectors, firms linked to higher-risk jurisdictions, and newly established businesses with limited operating history typically require greater scrutiny.

“It should not be viewed as something negative, and certainly not as being against businesses. Rather, it is part of the bank’s responsibility to understand who it is dealing with,” he said.

 Compliance as a business enabler

Meanwhile, James Mathew, CEO of UHY James Chartered Accountants, highlighted that reforms such as corporate tax, stronger reporting standards and improved governance have transformed compliance from a regulatory obligation into a business enabler.

“Compliance has always been an enabler for business. Stronger validation mechanisms now enable banks to make more informed lending decisions by assessing financial statements, sales performance and overall business viability,” said Mathew.

He noted that fewer than 30 per cent of registered companies each year typically access bank credit, highlighting the importance of building financial credibility early. 

“The quality of financial information plays a central role,” he said. “Good information is good accounting, and good accounting is protection.”

He added that while governance standards have strengthened confidence within the banking system, businesses with non-resident ownership often undergo additional due diligence because banks need greater assurance around accountability, credibility and verification.

Free zone opportunities

Tax planning also forms an important part of financial readiness, particularly for businesses established in the UAE’s free zones.

Girish Chand, Senior Partner at MCA Gulf, said free zones continue to offer significant tax advantages, but businesses must ensure they meet all regulatory conditions to retain those benefits.

"Goods-based businesses operating within designated free zones may benefit from VAT efficiencies, while eligible companies can also qualify for the 0 per cent corporate tax rate under the UAE’s qualifying free zone regime," said Chand.

However, he cautioned that the treatment differs for service-based businesses and that tax benefits are not automatic.

Chand said the diversity of the UAE’s free zones allows entrepreneurs to select jurisdictions aligned with their operational and commercial objectives, enabling businesses to maximise both tax efficiency and long-term growth while remaining fully compliant.

Panellists reiterated that successful banking relationships are no longer built on documentation alone.

“For start-ups and SMEs, transparent ownership, sound financial reporting, tax compliance and clear business information have become the foundations of credibility, giving banks the confidence to say yes,” explained James.