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DUBAI, July 23 (Xinhua) -- A United Arab Emirates (UAE) official said on Saturday that small to medium enterprises (SMEs) will be exempted from bank guarantees starting from Oct. 1, local daily The National reported.
So far, bank guarantees are necessary to secure the payment of salaries to SMEs' employees.
Saqr Ghobash, Minister of Human Resources and Emiratisation, told the daily that the decree was implemented after the ministry studied how to exempt SMEs from commitments and bureaucracy.
The report quoted Paris Norris, founder of a Dubai-based education firm, as saying that the move will be welcomed by SMEs as an effort to reduce paper work and financial commitments.
Entrepreneurs demand further steps to encourage the foundation and support of SMEs by the government, notably in the regulation of default payments and insolvency, according to the report.
The owner of an SME defaulting on a cheque can be imprisoned under the current UAE law if the default is due to illiquidity.
The Washington-based International Monetary Fund, a multinational organization to ensure the global financial stability, said last week in an assessment of the UAE that the Gulf state "should help facilitating SMEs' and startups' access to finance, notably through an approval of the bankruptcy law."
There are 300,000 SMEs in the UAE, employing 86 percent of the workforce in the Gulf state's private sector, local reports said. Enditem
