As part of the initiatives outlined under its strategic plan, and after having conferred with the financial markets operating in the country, the Securities and Commodities Authority (SCA) held a series of consultations with a number of leading government institutions to implement an initiative that aims to find innovative solutions to finance pioneering enterprises, such as creating channels through which such enterprises can access the capital markets operating in the country and make use of the financing methods available, given the role that these enterprises play in achieving sustainable development.
SCA has already prepared a proposal as part of a detailed plan tailored to implement the initiative. The proposal was presented to the parties concerned to get their feedback and to explore together the best options available, along with the implementation requirements, and then adopt the best solution.
This will help to achieve the desired objectives of the initiative and advance the development of projects aimed at structuring the financing of pioneering enterprises.
In this context, the representatives of SCA, headed by H.E. Dr. Obaid Al Zaabi, Chief Executive Officer of SCA, held several coordination meetings with Khalifa Fund for Enterprise Development, Mohammed Bin Rashid Fund for SMEs, Sharjah Department of Economic Development and Ajman Department of Economic Development.
To implement this initiative, government funds that provide finance to young entrepreneurs and small and medium enterprises will issue sukuk, bonds, or units in portfolios and will offer them to the investing public in the form of securities (of a small nominal value ranging between 100 to 1000 dirhams) that will be traded on in domestic securities markets.
These government funds provide finance to small and start-up businesses through loans or direct investments. Through the proposed initiative these loans will be securitized or units will be offered through special purpose vehicles (including loan-backed portfolios or direct investments in these enterprises) and these securities will be offered to the general public.
The portfolio of assets may include loans that have already been extended to SMEs or provide new funding for these enterprises operating in all sectors of the economy, especially the rising ones, such as the technology.
Different classes of securities will also be offered according to the nature of returns and the expected risks of these enterprises in an attempt to provide more options to interested investors and to target different categories of investors according to their investment objectives.
One of the key advantages of this innovative mechanism is enabling investors, whether retail or corporate, to join this promising sector by financing such enterprises, creating investment opportunities for government funds, and providing new capital to support this sector, thus benefiting the national economy.
