Challenges & Obstacles Facing Entrepreneurial Business Setup in the UAE - Management Assignment Help

Assignment Task

A study of the challenges facing small and medium enterprises in the UAE.
Introduction including rationale, conceptual underpinnings, purpose, questions and scope:
Rationale:Entrepreneurship is constantly increasing in the United Arab Emirates. The Ministry of Education are now offering optional courses on entrepreneurship on a federal level in three government schools and twelve private universities (The National, 2016). There are only four accredited universities by the Ministry of Education in the UAE offering entrepreneurship degree (3 bachelor and 1 master) according to the recent published list of accredited universities in the UAE by the commission for Academic Accreditation (CAA) of the Ministry of Higher Education and Scientific Research (MOHESR) (Ministry of Education, 2018).
Entrepreneurs are faced with challenges across the world, the Middle East and the Gulf Cooperation Council (GCC). There are twenty two (21) countries in the Middle East and there are twenty two factors (22) that may affect entrepreneurship and entrepreneurs across the Middle East in general: access to finance, access to land, anticompetitive practices, awareness of business support, business licensing, cost of finance, equality rights, information & telecommunications, labor regulations, lack of role model, lack of structured framework, lack of support providers, networking, non-representation at policy development level, policy restrictions, social rights, social trade regulations, tax administration, tax rates, technology, transportation, and unavailability of skilled workers (Mathew, 2010).
We have a number of critical factors affecting the success of entrepreneurship in the UAE. These are:
Access to sufficient capital to kickstart the business
Barriers encountered in setting up business accounts
Inadequate Leverage enjoyed by new businesses
Insufficient business support
Restrictions on ease of operation based in government policies
Need for Mentoring
High Competitive reprisals from incumbents
High CTS (Cost to Serve) For instance -the implementation of VAT
The literature has shown that women entrepreneurship in the Middle East and North Africa (MENA) based on the Global Gender Gap Index (2012), still on the lower rates of participation due to similar challenges faced (Mcloughlin, 2013).
Implications
The insights offered by this study can help practitioners understand the implications of inherent challenges faced by SMEs in the UAE. For instance, it’s critical that SMEs are offered the right support at infancy. A critical example in the retail sector would be basic marketing support / mentoring. In the retail space, digital promotional tools are critical to the success or failures of even the incumbents. This is further aggravated by the start-up SMEs.
Marketing for retail SMEs is even more significant in countries like the UAE, with a high retail market salience and a disproportionately high number of SMEs playing in this sector. SMEs can leverage the social media platform to generate brand awareness for much less money than they would spend on traditional media channels. Therefore, marketers could further explore ways to enhance their marketing strategies.
The Government can provide leverage by ensuring the creation of an environment that is congenial for women entrepreneurs and should also make sure that women entrepreneurs know about the opportunities offered by social media and chat applications. They can do this by organizing business networking events, encouraging dialogue and intra-regional discussion within the UAE and offering training programs for women entrepreneurs that include basic and advanced digital marketing techniques, which will increase the women’s marketing competence. This study further reveals the supplementary nature of traditional media in marketing, which now primarily supports more modern promotional tools.
Literature Review:
The entrepreneurship topic covered widely across the globe. There are plethora of literature talking about entrepreneurship from different angles. However, there are limited sources in the literature of entrepreneurship in the UAE. The definition of an entrepreneur in the USA is defined as the one who starts his or her own business whether it is a small or a brand-new business (Drucker, 2014). Hence, entrepreneurship can be defined as a process that carries along a new flavor combining new products, market, and sources (Sharma & Chrisman, 2007). While entrepreneurship and SMEs play an important role in the UAE economy, it has its own unique challenges, especially funding by banks. Banks in the UAE have an important responsibility to fund entrepreneurship and SME sector which is the real backbone of the economy (Baby & Joseph, 2016). The fact that the lack of clarity and accessibility to opening a business account still nearly impossible or a hard mission to accomplish nowadays in the UAE market. The opening of a new business account is crucial for any new start-up businesses. That is given the fact that the increasing significance and visible impact of entrepreneurship in wealth-creation and business development in the country would require education programs designed for rapid development and growth of young entrepreneurs (Kargwell, S. and Inguva, I., 2012).
Research Questions:
What are current status and performance levels of SMEs in the UAE?
What are the challenges facing entrepreneurs in the UAE?
What are the specific criteria required to succeed as an SME in UAE?
Purpose:To understand the current status and performance levels of SMEs in the UAE?
To highlight the challenges facing entrepreneurs in the UAE
To determine the specific criteria required to succeed as an SME in UAE
Scope: According to Levie and Hart (2012), in 2010, there were 104m women entrepreneurs in 59 economies worldwide. Self-employed women comprise between 1.5 and 45.4 percent of the adult female population in their respective economies (Levie and Hart, 2012).
This global trend is reflected in the UAE. The UAE has attracted a disproportionate number of foreign workers, who comprise about 80 percent of the total population and are estimated to number about 4m. Among these are expatriate women who have joined their husbands and settled in the UAE, where they have the choice of staying at home, getting a job, or more recently, setting up their own business. The attractiveness of the third option can be attributed to the UAE’s business-friendly environment. The UAE is a multicultural country, and culture is widely thought to regulate both the quality and aggregate rates of entrepreneurial activity in different countries. According to the UAE Ministry of Economy, women own nearly half of the UAE’s SMEs (Haroun, 2017). Hodgson (2012) compared women entrepreneurs in Canada and the UAE and found that the latter face fewer barriers than their counterparts in Canada. Tong et al. (2012) showed that the temporary residency status of expatriate workers does not prevent them from becoming
The conceptual framework of the present study is based on a number of delimitations chosen by the author to ensure that the data obtained is specific to female entrepreneurship and business set up in the uae which be useful for improving business operations. The limitations of the study are mainly related to time constraints and data accessibility. The delimitations and limitations are listed below.
Delimitations:
Data collection was limited to female entrepreneurs.
Limitations:
This study included only 20 women entrepreneurs in the SME sector. They all work in the same industry and the same country. In addition, the qualitative nature of the study could affect the generalizability of the results. Thus, further research using quantitative techniques is warranted;
Research methodology including research strategy, sampling strategy, data collection and analysis methods and validity and reliability:
Research Approach and Strategy:
Sampling Procedures:Our research in the market of the United Arab Emirates will comprise qualitative and quantitative tools in the form of questionnaires. The researcher will gather data through face-to-face interview using pen and pencil approach, phone calls and written correspondence via emails.
Questionnaires will be focused on the following:
Understanding the current status and performance levels of SMEs in the UAE?
Identifying the challenges facing entrepreneurs in the UAE
Understanding the specific criteria required to succeed as an SME in UAE
Interviews will be conducted across ten (10) SME practitioners and surveys will be issued to 200 new entrepreneurs and existing businesses as well as with banks in the UAE market.
Data Collection Methods:
In this study, data will be collected using a semi-structured interview that will allow the researcher to monitor the conversation and ensure that all important topics were covered to maintain consistency
The data employed in this study will comprise primary and secondary data. The initial exploratory phase of the study will involve semi-structured interviews with the heads of department; the data obtained through this exploratory study will be used to solve for the research objectives listed above. Subsequently questionnaires will be administered to SME practitioners as part of the quantitative surveys
Data Analysis:
After conducting our interviews, and collecting the questionnaires, the research revealed that, in most cases, entrepreneurs approach the banks for finance based on market opportunities, which need an immediate action, to get advantage being the first or one of the first running respective business. Here they start to face the reality: opening a bank account, sometimes being a start-up, so no profit history behind. The analysis of the interviews/questionnaires came up with the following results:
Requirements to open an account (documents and others)The required documents to open a business account in the UAE are somehow similar for all different banks without specifying a one. These documents are considered general standards documents. Most banks require trade license, chamber of commerce, memorandum of association, tenancy contract, passport copy and original, emirates ID copy and original, visa page copy and original, and previous bank statement of three months from another bank of the existing business account of another bank or personal account if business account is not available for new businesses.
Minimum balance required for opening the account. The minimum balance required to open a business account in the UAE varied from one bank to another. Each bank has a set of different requirements that are completely different from the other.
The figures range from AED 15,000.00 till 50,000.00. This is equivalent in US Dollar, based on the exchange rate of USD 1 = AED 3.65 (exchange rate between USD and AED is pegged by law), subsequently from USD 4,110.00 till 14,859.00. This is not forgetting the fact that some banks cannot accept to open an account unless otherwise you have a minimum balance of AED 250,000.00 or 500,000.00. This is equivalent in US Dollar, subsequently from USD 68,494.00 to 136,986.00.
Figure no.1: Minimum and maximum balance to open business account in the UAE. The issue is that for new entrepreneurs, in our opinion as researchers, is considered an obstacle. This money, for start-up businesses, can be invested somehow in the business than keeping
it in the account itself. That’s a challenging obstacle as banks usually do not give a loan for new entrepreneurs. They expect you on contrary to come up with the money they require. This is a paradox in the encouraging entrepreneurship economy. A critical issue that needs to be addressed in two disciplines. The first one is supporting new entrepreneurs with loans. The second one is removing the minimum balance required so they can invest it in their businesses instead.
Minimum balance required monthly to maintain the balance account In the UAE, there is what’s called minimum balance imposed on business accounts when not maintaining the minimum balance required by the bank to open a bank account. This applies on thriving existing businesses: local, international, and new aspiring entrepreneurs. The minimum balance required to maintain your account without getting charged what’s so called minimum balance fees varied from one bank to another. It ranged from AED 15,000.00 to 50,000.00. This is equivalent in US Dollar, subsequently from USD 4,110.00 to 14,859.00.
Figure no.2: Minimum balance required monthly to maintain the balance account in the UAE. This is another obstacle, in our opinion as researchers in the field, faces talented entrepreneurs who wants to open their new business. This minimum balance maintained can be utilized in investing in their businesses. The amount is not small as a matter of fact considering that this is all money brought out of their personal pockets and none of it given as loans or subsidies for new entrepreneurs. This, once again, applies to all businesses regardless of the length and wealth of it and regardless whether the business is newly national, existing national, or international.
Monthly service fees and their destination. Over analyzing data collected from various banks randomly, we found out that there are minimum monthly balance required by an investor or an entrepreneur to pay if the minimum required balance is not fulfilled or maintained.
Figure no.3: Minimum balance required to be paid if the balance account not maintained. The minimum balance required to be paid to banks if minimum balance is not maintained varies from one bank to another. It ranged from AED 150.00-300.00 and all the way up to 1500.00.
This is equivalent in US Dollar, subsequently from USD 42.00-82.00 till USD 411.00. Not forgetting the fact that certain banks require monthly fee balance deducted from the account with the amount of AED 200.00 equivalent to USD 54.79. It is labelled as a standard monthly fee on the account. This means that regardless of the existing rules and regulations of the Central Bank, obviously there are no set rules in place that regulates the minimum, average and maximum imposed on entrepreneurs whether existing or new start-ups. That leads to the realization that each bank acts independently as a separate entity of its own. That leads to a reality of the fact that
entrepreneurs are victims of the set rules of each bank. It is in fact a paradox. This, in turn, contradicts to the policy of the UAE set by its leaders which entails encouraging entrepreneurship and entrepreneurs of all level. One of the fundamental issues’ worth investigating further.
How long does it take to open a bank account? Some banks can open the business account faster than others. Every entrepreneur goes into a process of two stages. The first stage is called obtaining an approval. This takes approximately 5 – 10 working days depends on so many factors without getting the details of it.Figure no.4: Stages and Timeframe of opening a business account in the UAE. This time frame is applicable in case all required documents submitted on time. It can go longer than this time frame in case there is any delays from an entrepreneur. The second stage is called opening the account stage that takes approximately between 1 – 2 hours with a huge pile of paperwork that requires signature on almost every part. However, other banks it can take another 5 –10 working days for opening the account. Another obstacle facing entrepreneurs that needs to be addressed.
What is the required minimum turnover of the business?Strangely but not odd that banks are asking any entrepreneur who wants to open a business account a question of a turnover. Every bank requires minimum and maximum turnover. Figure no.5: Minimum and maximum turnover for opening a business account in the UAE
Validity and Reliability:To ensure validity of the study design and consequently of the data obtained, the author has referred to good literature sources from peer-reviewed journals with high citation rates. She has followed the advice recommended in the said articles and maintained close attention to their limitations and shortcomings.
The initial pilot (or exploratory) tests are also aimed at increasing the validity and reliability of the study by seeking to identify differences in the policies and procedures between the departments under study to detect potential pitfalls and sources of bias that may result from these differences.
The sampling procedures for participants in the study was chosen to reduce bias resulting from gender, age, educational and socio-economic differences. The results of the pilot study may further influence the sampling method for the main study.
Questionnaires used in the main study have be validated by previous investigators, who have used standard statistical methods across all the cited studies. Specifically, internal consistency (reliability) of multi-item measures in the said questionnaires were all estimated by Cronbach’s coefficient alpha (?) taking a value of ? ? .70 as a level of sufficiency for basic research (Nunnally, 1978). The current study will follow these guidelines.
Data Access:
The researcher will acquire all necessary permissions from SME CEOs and all SME relevant practitioners relevant to the study
Data will be obtained from employee participants through a questionnaire that is emailed to them through Survey Monkey; the said employees will be requested to complete said questionnaire within 5 days.
The act of completing and submitting the survey indicates that the participant is providing his/her permission for use of the derived data in the current study. This will be clearly stated at the beginning of the survey and the participant will be required to tick a tick box to confirm consent and that the data submitted is true and free of any errors. Data processing and analysis will be done in the researcher’s private office

 

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