Details

Growing need for establishing startup business incubators to augment their contributions to regional economy

-Financing main challenge for startups

-UAE accounts for 20% of the region’s startups

Al Mazaya Holding’s weekly report indicates that startups in the region have achieved significant success over the past few years. While the percentage of people who prefer to work on their own right stands at 60%, the challenges associated with getting sufficient finance and capital availability are some of the main reasons behind the failure of some startups and SMEs, with a large number of entrepreneurs relying on personal and family savings and retail loans from banks, credit institutions and credit cards to provide initial financing.

Al Mazaya noted that the success and failure stories in this business are not confined to a specific sector or a certain field but have rather been recorded have across all service and commercial sectors – a fact that makes startups a viable option for several segments of society.

The region’s markets are set to move further in supporting and expanding the activities of start-ups thanks to the rapidly growing technological advances and ever-evolving business mechanisms.

In the meantime, these small-scale companies seek to save efforts and time as well as reduce costs associated with communication and marketing of products or services by employing technology that streamlines marketing of sales through modern applications and electronic solutions conducive to tapping fresh target markets, both locally and overseas.

The report added that startups and SMEs contribute significantly to the use of modern technology, as well as support economic diversification and job creation. Such considerable benefits entail the establishment of a dynamic network of investors who support their financing and build successful and strong business models to ensure stable cash flows.

All available indicators reflect improvements in the performance of these small companies and their contribution to the regional GDP, with regional governments steadily growingly proving to be the main supporters of the startup’s environment.

The UAE is at the forefront of the region’s economies that has proved to be a regional hub for SMEs and a centre of innovation that plays host to 20% of the region’s startups and more than 60 out of the top 100 companies in the Middle East in 2018 that drew up to $610 million in FDI inflows. This is coupled with the improvement in the region’s economies which in general stimulates entrepreneurship.

The desired impact of startups needs more time to materialise, despite the successes achieved to-date, including the associated successful investments.

These companies are expected to maximise their economic value should efficient solutions be reached to address the challenges they face.

Al Mazaya’s report highlighted the importance and the significant role played by startups in the overall economic cycle. The high achievement rates of startups reflect the economic success of the local economies as a whole. In addition, the success achieved by these companies reflects favourably on the economic sectors they belong to. Providing basic incubators to startups will ensure success for existing SMEs.

Al Mazaya Report stressed that startups would certainly prove growingly successful in the region over the next few years, benefiting from the direct and indirect support provided by SMEs.

Available industry data indicate that these companies’ contributions to GDP increased to 20% in Saudi Arabia, with the Kingdom seeking to develop this sector so that it can become the main creator of job opportunities.

The UAE economy aims to raise the contribution of SMEs to 60% by 2021, from 53% of GDP in 2018.

The global average contribution of SMEs to GDP is 46%, with efforts made towards maximising their share expected to result in incremental contributions to the current GDP.

The report concluded by saying that the emerging companies’ environment is rapidly improving in the region; however, according to the report, there is still much to be done to reach the ideal scale of these companies.

The progress recorded so far has not resulted in establishing integrated incubators capable of providing all forms of financial support and opening channels of local and international funding that help in promoting these projects and providing the needed legal and legislative support.

There is now a growing need to establish such incubators in the region so that young people can get the right opportunities and contribute to the economic future of the region and the world by maximising the performance of emerging companies.