Dubai:  A number of companies in the UAE have fled the country during the first part of the year to escape loan repayments and other financial obligations, while small firms are still struggling with unpaid debts, sources have said.

But the situation is not alarming, as the incidence of business owners skipping payments has eased. According to a bank in the UAE, companies in the small and medium enterprises (SME) and real estate sectors have been a “major” concern. Small businesses, in particular, have gone through repayment issues with lenders and suppliers.

“Exposure to SME and real estate is a major worry. The SME sector has been negatively affected by uncertainty in payment schedules and liquidity issues in the banking sector,” Alp Eke, senior economist at the National Bank of Abu Dhabi (NBAD), told Gulf News.

A total of 239 companies, mostly small and medium enterprises (SMEs), ran away from UAE lenders and suppliers between July 2015 and March 2016 alone, according to credit insurance agency Coface.

Many of the companies earlier reported to be in distress were general trading, food, IT and electronics businesses. There were also runaway cases recorded in the chemicals, petrochemical, metals and construction sectors, according to the data provided by Coface.

“Such companies, which are under pressure due to tight liquidity, usually run away from both banks and suppliers,” Massimo Falcioni, Coface CEO for Middle East countries, told Gulf News.

Coface is a global company that provides trade credit management solutions and risk information services. It tracks 80 million businesses around the world, with daily updates on payment behavior, financials and country risks.

The number of runaway cases recorded in the UAE was based on a sample of 33,000 UAE and Saudi Arabia companies that Coface is currently monitoring.

According to Coface, 80 per cent of the runaway cases recorded in one year were SMEs. Small businesses have been having trouble settling their dues as liquidity levels have gone tighter.

“A drop in commodity prices and lower demand from the export markets of commodities, mobile and building materials have affected the cycle of payments,” said Falcioni.

“Commodity traders, IT and electronics distributors, and SMEs in building materials, such as electric appliance distributors, have a low profit margin, resulting to a very crucial working capital management

However, some analysts said the situation is not alarming, citing that the number of skipping companies are on a decline, and with the introduction of a new bankruptcy law, runaway cases will ease further.

Eke noted that the ratio of non-performing business loans have declined and stabilized to 6.4 per cent. “Provisions to gross loans estimated at a new high of 8 per cent in August 2014 but dropped to 7 per cent by April 2015. Provision growth declined drastically and now largely driven by specific provisions,” he added.

The good news is that the proposed new bankruptcy law will provide a relief to companies who are struggling financially.

“Under the current system, cheque bounces are considered a criminal act and the business owner can be jailed for the same. Hence, under current economic conditions, fleeing the country is a last resort for the business owners, a majority of them being expats,” Raghu Mandagolathur, senior vice president for research at Kuwait Financial Centre said.

“The proposed new bankruptcy law, which is expected to be in force by the end of 2016, would decriminalize bounced cheques and provide an option for the business owner to seek a restructuring plan with the creditors. This would provide relief for business owners and give more confidence to stay in the country.”