Nine in 10 GCC SMEs aim to raise capital soon

Despite slowing economic growth, almost nine in 10 SMEs in the GCC plan to raise capital in the next one to two years, a new study has revealed.

According to the Driving Value from Good Corporate Governance report by the Pearl Initiative (PI), a non-profit organisation promoting a transparent and accountable corporate culture, 89 per cent of micro, small and medium enterprises intend to raise capital finance over a two-year period.

The study, which polled more than 1,000 GCC-based SMEs in June and July this year, offers an insight into the state of corporate governance in the region.

It found half of those polled have established formal governance documents, while only 30 per cent are implementing them, such as audit reports, risk reports and staff feedback. Even fewer admitted to proper auditing.

“By lowering risk, an effective corporate governance structure can make an SME more attractive to investors.

“The right governance measures can also enhance the business reputation of an SME and attract talented and experienced employees who seek growth opportunities, transparency and a stable organisational structure,” PI executive director Carla Koffel said.

The Pearl Initiative said its study indicates clear challenges for SMEs in the region, with business reputation, financial performance, ethics and social responsibility emerging as crucial factors in attracting investors and long-term funding.

“While there is no one-sizefits-all solution, the findings and observations from this report clearly indicate that implementing an integrated system of corporate governance practices can help SMEs achieve agility and resilience to overcome some of the key challenges they face.”

The SME sector accounts for more than 80 per cent of GDP across countries in the GCC and creates close to 70 per cent of all jobs, according to PI.