This paper was presented at the World Bank and IFAC conference in Abu Dhabi in July 2014. Issues around the role of SMEs and SMPs proposition were addressed. It has also explored the structure of the accounting market and provided some globally and regional benchmarks. The author has used UAE as a case study and introduced for the first time SME development model.

1. Distribution is restricted to …
Small and Medium Practitioners Role in Enhancing the
Growth of Micro, Small and Medium Enterprises MSMEs
UAE as a Case Study
Bassel Nadim
CEO, AAA
June 12, 2014

2. © 2014 AAA2
Profession
- Bassel is a the CEO of the UAE Accounting and Auditing Association, a semi-regulat
body that supervises the non-financing financial services in the country
- The founder of Tanmia Capital Limited, a newly established consulting house in
London
- Ex-Deloitte Consulting and a Co-leader of the Islamic banking strategy offerings
- more than 15 year of management consulting experience of which 10 year were
dedicated to provide strategy advice and leadership assistance to financial institutio
in general with a focus on Islamic finance across the Gulf countries, MENA, CIS and
Caribbean’s
Education
- MPhil in monetary policy from the UK, with a focus on financial labialization and
monetary regulation in developing countries in 2002
- Certified Islamic Public Accountant, CIPA
- Risk in Financial Services, CISI
- Insurance Certificate, CII
- Strategic Planning, George Washington
- Leadership Program, Harvard Business School
His recent works address issues around capacity building and financial inclusion. He w
actively involved in the ethical finance debate at the Scottish Parliament last winter an
had led a world class conference on Islamic banking in Dubai in March 2014 and
participate in a workshop with the World Bank and IFAC on small and medium
practitioners in June 2014.
About the Author
Bassel Nadim
www.basselnadim.net
bassel@basselnadim.net

3. © 2014 AAA
Contents
3
• Overview of the AAA
• Doing Business in the UAE
• UAE SME Landscape
• The SMP Proposition

4. © 2014 AAA4
The Accountants & Auditors Association is undertaking strategic initiatives to
reposition itself in the professional and financial sectors in UAE
Overview of the AAA
History
•Federal Agenda established in
Dubai in 1997
•Non for profit organization
•Considered Semi-Regulatory
Body
•Accounting and ethics standards
development mandate
•Capacity-building mandate
Recent Accomplishments
•UAE Chartered Accountancy
Qualification in partnership with ACCA
•Provided capacity building for 100 UAE
Nationals to become Chartered
Accountants
•World class conference on accounting
and auditing in Islamic banking
•SMP event

5. © 2014 AAA
UAE Ranked 23rd for Ease of Doing
Business, 2013
5
Source: EIU UAE Country Report and Forecast.
World Bank, Doing Business 2014
175
206
254 249
269
304
330
360
396 411
13%
6% 7%
-3%
2% 4%
5%
5%
6%
6%
2006 2007 2008 2009 2010E 2011F 2012F 2013F 2014F 2015F
GDP at current prices
Nominal growth rate
6
6
4
24
43
69
119
133
143
4
4
1
5
37
86
98
100
101
Trading across borders
Registering property
Paying taxes
Construction permits
Starting a business
Getting credit
Protecting investors
Enforcing contracts
Closing a business
2010-2011
2012-2013
Doing Business in the UAE
The UAE is ranked 23rd for ease of doing business and is the second largest
economy in the GCC after Saudi Arabia
UAE Nominal GDP, 2006 – 2015f,
(USD bn)

6. © 2014 AAA
UAE Ranked 23rd for Ease of
Doing Business, 2013
6
Source: EIU UAE Country Report and Forecast.
World Bank, Doing Business 2014
175
206
254 249
269
304
330
360
396 411
13%
6% 7%
-3%
2% 4%
5%
5%
6%
6%
2006 2007 2008 2009 2010E 2011F 2012F 2013F 2014F 2015F
GDP at current prices
Nominal growth rate
6
6
4
24
43
69
119
133
143
4
4
1
5
37
86
98
100
101
Trading across borders
Registering property
Paying taxes
Construction permits
Starting a business
Getting credit
Protecting investors
Enforcing contracts
Closing a business
2010-2011
2012-2013
Doing Business in the UAE
The UAE is ranked 23rd for ease of doing business and is the second largest
economy in the GCC after Saudi Arabia
UAE Nominal GDP, 2006 – 2015f,
(USD bn)

7. © 2014 AAA7
UAE SME Landscape
In terms of regulations, the new UAE SME law aims to boost and support the
development of the SME sector
FederalLevel
LocalLevel
(major)
SME Law
(Law 2 / 2014)
The SME Council The National Program of SMEs
• The Program is established under MoE
supervision to enhance collaboration and
coordination with other stakeholders
• Main responsibilities:
 Capacity building guidance
 Research, database and evaluation
 Coordinating incentives
 Encouraging partnership and mergers
among SMEs
MoE is tasked to set up and chair the Council
and assign members from public and private
stakeholders
Main Responsibilities:
 Policy and strategy making
 Developing rules to coordinate between the
National Scheme and other stakeholders
 SMEs national KPIs
 Firms classification review
Abu Dhabi
• Khalifa Fund
Dubai
• Mohammed
bin Rashid
Establishmen
t for SME
Development
Sharjah
• Ruad Est.
Ajman
• Chamber of
Commerce
and Industry
plans
Ras Al Khaimah
• HH Saud bin
Saqr
for youth
projects
Fujairah
• Fujairah
small
projects
center
Umm Al Quwain
• On going
activities
Local Support & Initiatives to the SME Sector

8. © 2014 AAA8
UAE SME Landscape
UAE SMEs make a major contribution to the economy and to employment,
however the SME definition and concept needs to be revised
18
84
25
60
67
14
60
33
45
66
Oman UAE KSA Global EU
SME Contribution to Employment (%)
SME Contribution to GDP (%)
5 6
10
15
18
23
Oman China Jordan UAE US Bahrain
SME Contribution to Employment and GDP, 2013 SME Density (SMEs per 1000 people*)
• SMEs make a large contributors to employment and GDP – the significance of
the sector is well-established
• However, more work needs to be done around the definition of SMEs to better
understand their contribution to the economy. This is in light with Law 2/2014
Sources: Hawkamah Institute for Corporate Governance, 2012; "Kuwait's SMEs: Looking for a Champion" Kuwait Financial Centre (Markaz); IWF Conference; MoCI; Chaaban J., Job
Creation in the Arab Economies: Navigating Through Difficult Waters, 2010; http://www.tradingeconomics.com; SME- UAE Magazine-Abu Dhabi Commercial Bank (ADCB); Oman
Supreme Council for Planning National Center for Statistics and Information: The Statistical Year Book 2012; European Commission [Annual report on Small and Medium-Sized
Enterprises in the EU, 2011/12 (Ecorys); Capita Group International (CGI) 2011 Report

9. © 2014 AAA9
UAE SME Landscape
UAE SMEs make a major contribution to the economy and to employment,
however the SME definition and concept needs to be revised
18
84
25
60
67
14
60
33
45
66
Oman UAE KSA Global EU
SME Contribution to Employment (%)
SME Contribution to GDP (%)
5 6
10
15
18
23
Oman China Jordan UAE US Bahrain
SME Contribution to Employment and GDP, 2013 SME Density (SMEs per 1000 people*)
• SMEs make a large contributors to employment and GDP – the significance of
the sector is well-established
• However, more work needs to be done around the definition of SMEs to better
understand their contribution to the economy. This is in light with Law 2/2014
Sources: Hawkamah Institute for Corporate Governance, 2012; "Kuwait's SMEs: Looking for a Champion" Kuwait Financial Centre (Markaz); IWF Conference; MoCI; Chaaban J., Job
Creation in the Arab Economies: Navigating Through Difficult Waters, 2010; http://www.tradingeconomics.com; SME- UAE Magazine-Abu Dhabi Commercial Bank (ADCB); Oman
Supreme Council for Planning National Center for Statistics and Information: The Statistical Year Book 2012; European Commission [Annual report on Small and Medium-Sized
Enterprises in the EU, 2011/12 (Ecorys); Capita Group International (CGI) 2011 Report

10. © 2014 AAA
SMEs By Sector in the UAESME By Emirate SME Capex / Sales Ratio for Key
Segments of the Services Sector -
Dubai
SMEs Productivity Benchmarks
(US$ PPP)
Productivity of Labor - Dubai
SMEs. (US$ PPP)
10
The majority of SMEs are located in Dubai and focus mainly on the trade and
retail sectors
Dubai
45%
Abu
Dhabi
32%
Sharjah
16%
Others
7%
Manufacturing
11%
Trade &
Retail
73%
Services
16%
2-10%
Upto 5%
Upto 5%
Upto 2%
Upto 2%
Upto 1%
Upto
0.5%
Transport & Logistics
Restaurants &
Catering
Business Services
Construction &
Contracting
ICT
Professional Services
Travel Agencies &
Tour Operators
107
59
31 26
Singapore South Korea Dubai New Zealand
Source: D&B Business insights: SME Dubai; Local Media Reports
67
38
25
Meduim
Small
Micro
UAE SME Landscape

11. © 2014 AAA11
The World Bank indicates that financing for SMEs in MENA and GCC regions is still low
UAE SME Landscape
0.5%1% 2% 2% 2% 2%
4% 4% 5% 6%
10%
13%
15%16%
20%
24%
SME Loans as a % of Total Loans for MENA
Countries, 2011
Weighted Actual and Target SME Lending, 2011
Actual SME Lending
Target for SME Lending
 Only 20 percent of SMEs in the MENA
region have a loan or a line of credit,
and only 10 percent of their investment
expenditures are financed by a bank
loan
 According to ACCA Global SME Survey,
lending in the Middle East is recovering
since 2012
 In high income countries, nearly 22
percent of bank lending goes to small
businesses
 UAE is ranked 23rd out of 181 countries
for “getting credit” in the 2014 World
Bank Doing Business Survey, yet the
SME demand for financing is high
Source: The Status of Bank Lending to SMEs in the Middle East and North Africa Region: Results of a Joint Survey of the Union of Arab
Bank and the World Bank which covered 139 banks in 16 countries in the Mena region; 2011
ACCA Global SME Survey, 2013

12. © 2014 AAA12
UAE SME Landscape
AAA believes 5 fundamentals need to be addressed to assist and enhance the SME
sector
- Allocating 10% of the federal
procurement to SME
- Allocating 5% from PPP procurement
to SME
- Designated space and Networking
Confidence
Budget
allocation
Capital
Market
Accessibility
Source of
Funds
SME
Fundamentals
Public
Awareness
Opex
3
Regulations
4
2
1
5
- YBL
- SME Award
LicensingIncentives
- EDB
- Local banks
initiatives
- DEA
- Khalifa Fund
portal
- Sponsoring
Guarantees
Capacity
Building
Marketing
support

13. © 2014 AAA13
UAE SME Landscape
SME Law no. 2/2014 is a good basis for defining SMEs from a UAE perspective
• Capital
• Revenue
• Net profit
• Staff
• Investment
Classical Alternative Auditing
• Social impact
• Environmental
impact
• Entrepreneurship
• Revenue- centric
Defininga
business
Micro
Small
Medium
Trading
< = 9
Employees Turnover
< = AED 9 mn&
< = 35 < = AED 50 mn&
< = 75 < = AED 250 mn&
Manufacturing
< = 20
Employees Turnover
< = AED 10 mn&
< = 100 < = AED 100 mn&
< = 250 < = AED 250 mn&
Services
< = 20
Employees Turnover
< = AED 3 mn&
< = 100 < = AED 25 mn&
< = 250 < = AED 150 mn&
widelyused
definition

14. © 2014 AAA14
The SMP Proposition
A new Auditing Law is being drafted, which should take into account the diversity of
market players
Audit Law
(Law 2 / 2014)
Governing Bodies (3)
- Ministry of Economy (regulator)
- Accountants and Auditors Association
- Securities and Commodities Authority
Big 4 Deloitte, EY, KPMG, PWC UAE
• 820
licensed
individuals
• Of which
406 are
Emiratis
Top 6
BDO, Grant Thornton, RSM, Baker Tilly
International, Crowe Horwath International, Nexia.
SMPs 95 Firms
Market Players
Source: Ministry of Economy

15. © 2014 AAA15
The SMP Proposition
A new Auditing Law is being drafted, which should take into account the diversity of
market players
Audit Law
(Law 2 / 2014)
Governing Bodies (3)
- Ministry of Economy (regulator)
- Accountants and Auditors Association
- Securities and Commodities Authority
Big 4 Deloitte, EY, KPMG, PWC UAE
• 820
licensed
individuals
• Of which
406 are
Emiratis
Top 6
BDO, Grant Thornton, RSM, Baker Tilly
International, Crowe Horwath International, Nexia.
SMPs 95 Firms
UAE Professional Practice Structure
Source: Ministry of Economy

16. © 2014 AAA16
The SMP Proposition
Although data is limited, AAA was able to estimate the size of the SMP market in the
UAE to USD 222 mn. This number need to be validated through census
Big 4
67%
Top6
14%
SMP
19% EMEA
SMP
42%
Rest of
world
SMPs
58%
Global Auditing Structure - 2012
%
EMEA SMPs Market Share - 2012
%
SMPs Country Size - 2012
Million US$
Estimating SMPs Market Size
• US$ 166 Billion is the size of auditing
services globally
• Of which US$ 31.5 Billion is the size of
SMPs worldwide
• US$ 13.5 Billion is the SMPs size in
EMEA region*
424
222
106
KSA
UAE
Kuwait
Sources: http://www.reuters.com/article/2013/01/30/us-accounting-idUSBRE90T15W20130130
Big4.com. Top 6 companies websites. IMF database. Tanmia Capital Ltd
* EMEA = Europe, Middle East and Africa
Revenue per an SMP - 2012
Million US$
3.3
2.4
2.7
KSA
UAE
Kuwait

17. © 2014 AAA17
The SMP Proposition
The UAE may not need more Audit firms, however existing firms may build their
business by delivering other professional / consulting services. Quality of work is key
Auditing firms as a function of some underlying variables
Revenue per an SMP - 2012
Million US$
3.3
2.4
2.7
KSA
UAE
Kuwait
• UAE may not require more auditing firms as it scores the lowest compared to some other GCC countries
• Audit firms in UAE shall consider non-audit business to drive its business
Market Capitalization per Auditing
Firm - 2012
Million US$
3.9
1.0
4.4
KSA
UAE
Kuwait
GDP per Auditing Firm - 2012
Million US$
5.3
3.6
3.7
KSA
UAE
Kuwait
Sources: http://www.reuters.com/article/2013/01/30/us-accounting-idUSBRE90T15W20130130
Big4.com. Top 6 companies websites. IMF database. Tanmia Capital Ltd
* EMEA = Europe, Middle East and Africa

18. © 2014 AAA18
The SMP Proposition
In fact, the AAA has identified the following opportunities to expand the activities of
SMPs in the UAE
SMP options
Based on ACCA and World Bank surveys, the
following are issues that need to be addressed
 Robust quality assurance systems
 Specializing in certain business area,
regulations
 Back office integration
 Innovation into niche markets / products
 Adoption of quality and efficiency
standards
 Improving partnerships and supply chain
relationships
AAA Initiatives
AAA is well propositioned to trigger with its
strategic partners initiatives around:
 Developing national quality control system
 Leads generation and referral
 Resources sharing
 Web-based tools