Dubai: A new financial services platform offered by a Dubai-based company aims to increase the level of support available for small and medium enterprises across the UAE.

Tawreeq Holdings launched the finance supply chain to ease the difficulties smaller enterprises face in tapping finance by providing them with immediate working capital at reasonable costs.

The company does this by monetising their clients’ receivables which can be used to support the development of their day-to-day operations.

“Supply chain finance is a well-developed concept in mature markets and has been successful in providing the support required by SMEs to grow,” said Haitham Al Refaie, co-founder and Group CEO. “Tawreeq takes an innovative approach to the concept, addressing the region’s credit gaps through Sharia-compliant factoring, reverse-factoring and ethical management of the entire cycle of supply chain finance solutions.”

SMEs make up as much 90 per cent of the businesses in the region but face massive challenges in managing their cash flow. Many of these businesses initially rely on internal sources of funding, but once the call for expansion arises, external funds need to be tapped to foster growth. This is not always forthcoming as UAE’s banks lending to this category have a lot of barriers to overcome.

Most UAE-based banks’ exposures to SMEs are not more than 10 per cent of their overall corporate lending portfolio. There is an estimated $260 billion (Dh954.9 billion) credit gap in the region, Al Refaie said.

Monetising receivables

The Tawreeq solution is based on Sharia principles in its structure, processes, profit rate and work-flow. Tawreeq will be buying the SMEs’ account receivables at a discounted fee to meet present and immediate cash needs.

While many SMEs in the region are unable to secure financing on favourable terms, the service will be provided based on the creditworthiness of the buyer. which results in lower risk, Al Refaie said.

“Supply chain finance platform will help SMEs to monetise their receivables quickly, thereby strengthening their cashflows and helping deliver on growth plans. It will also enable corporate entities to manage their payables and credit terms, as well as allow different categories of investors to participate in funding transactions.”

SMEs thus get to meet their cash flow needs and on the terms and duration they need without “our service overburdening them with requirements,” the CEO said.

The services can be offered to corporates and SMEs using a cloud-based and paperless process that takes less than seven days to approve a transaction.

The start-up funding for the Tawreeq platform was provided by a pool of local and regional investors.

“We are preparing to launch investment funds to attract liquidity from international investors who wish to invest in capital-protected, short-term, high-yield alternative investment instruments,” Al Refaie said.

“We believe our proposition presents an attractive investment opportunity as there is increasing pressure on institutional investors to diversify into other alternative asset and investment classes and our offering provides precisely that opportunity.”