The newsletter provides updates on the news, activities, and events of Emirates Chartered Accountants Group. It thanks readers for their support in successfully completing the group's first year of circulating the newsletter. The current volume reaches readers during Ramadan. One article discusses the challenges small and medium enterprises (SMEs) in the UAE face in obtaining bank financing, with banks lending only 4% of total lending to SMEs compared to double digits in developed countries. Another article describes the increasing bilateral trade relationship between India and the UAE.

1. CA. Manu Nair
CEO
INSIDE THIS ISSUE
The Emirates Chartered Accountant is a quaterly newsletter of Emirates Chartered Accountants Group addressed to all our registered
members and media to update the news, activities and events of the organization.
emirateschartered accountant
The
Newsletter
We once again thank all our readers, for the
fabulous support and creative guidance
you provided us in the juncture of successfully
completing one year of putting “The Emirates
Chartered Accountant” into circulation. The fourth
volume of this newsletter reaches you during the
Holy Month of Ramadan and in light of this, I’d like
to Wish you all “Ramadan Kareem”. May the almighty
shower your path with light and knowledge and
may this Ramadan remind you to forgive.
Small and Medium Enterprises (SME), the biggest
Entrepreneur of UAE, faces many fold challenges in
the business world. More than 90% of the companies
registered in Dubai are SMEs. On the contrary, in the
bank lending side, only 4% of the total bank lending
is to SMEs, where the same is double digits in
developed countries. Banks are reluctant to provide
loans to SMEs, referring to numerous facts such as
regulatory compliance, transparency in the business,
collateral etc. During the global financial crisis,
SME sector was resilient as only few companies
went back, and the companies that survived the
financial downturn have now rejuvenated, by taking
challenges as opportunities. My partner Pradeep Sai,
having practical experience in UAE in the SME sector
for more than a decade, has done a research work
financing SMEs in UAE in general. He tried to present
the same in few pages in this edition along with a
chart showing financial facilities available in different
banks in UAE. I am sure the reader will enjoy the
article.
In another article, my colleague, the Asst. Manager
Audit and Assurance Mr. Susovan Sarkar has
described the increasing Bilateral Trade Relationship
between India and UAE especially in the recent
political scenario of India.
Student Editor Sakkira Hamza and her team have
done an article on the significance of Inventory
Management.
This edition of “The Emirates Chartered Accountant”
will be reaching you while many of you are away
on summer vacation. But we expect this edition to
reach you through soft copy by way of mail. Wish
you all a good read ahead.
April - June 2014 Volume -4
EDITOR’S NOTE
Financing SMEs in the UAE 2
An Outlook on India-
UAE Business Interests 7
Students Desk 9
Inventory Management 10
More than figures.....
CA. Manu Nair
CEO
1

2. Buy & Use of Funds
What is the actual
requirement of funds?
How much to borrow? How to
allocate the costly funds etc?
Are questions that demand
efficient solutions from businessmen? The
business environment comprises companies
that have just started up or are in various stages
of their development. Each has its own reason
for being in business and each has its own
finance requirements.
A company requires financing to carry out its
business plan. There are two main sources of
business financing: through equity investors
(owners or shareholders) and creditors (also
called lenders). Financial markets are potential
sources of business financing. While looking to
financial markets, a company considers several
issues including: the amount of financing
necessary, source(s) of financing (owners or
financial institutions), timing of repayment and
structure of the financing agreement(s).
Borrowing from banks/financial institutions is
different than equity financing in an agreement,
or contract, is usually established requiring
repayment of the loan with interest at a specific
date(s). While interest is not always expressly
stated in these contracts, it is always implicit.
Getting the right banking partner is the success
of all business units which may support the
growth cycle with solutions that meet all their
financial needs in time. There are various types
of bank facilities available in the market. Interest
rate and the Facility amount depend on the
length of the company’s business, the industry
of the client, historical performance, future plans,
management profiles and the market reputation.
Banks are taking initiative to understand the
company’s business strategy and needs in order
to design a tailored solution to match with the
client’s requirements by reducing the risk and the
interest burden.
Loan periods are variable and depend on the
desires of both lenders and management of the
companies. It may vary from short term (say,
couple of months to one or two years) to long
term (say, 3/5/10 years etc).
Like owners, the financiers are concerned with
return and risk. From shareholders point of view
one has to bear in mind always that the cost of
funds is always less than the return anticipated
while going for borrowing. Otherwise owners
will be spending from their own pocket instead of
taking money to their pockets.
A company’s capacity to borrow depends on
several factors and is subject to change. It depends
on profitability, stability, size, industry position,
asset composition and capital structure. It also
depends on credit market conditions and trends.
Owners through proper finance team/personnel
have to manage the borrowed fund effectively to
ensure efficient utilization of the same.
Managing Corporate Finance
The finance director of a business has the
responsibility for managing the financial resources
of the business to meet the objectives of the
business.
Pradeep Sai
Director - Emirates Chartered Accountants Group
“Financing
SMEsinUAE”
2

3. The finance director’s responsibilities involve:
● Raising and controlling the provision of funds for the
business.
● Deciding on the deployment of these funds – the
assets, new projects, and operational expenditure
required to increase the wealth of the business.
● Controlling the resources of the business to ensure
that they are being managed effectively.
● Managing financial risks such as exposures relating
to movements in interest rates and foreign currency
exchange rates.
What level of investments/ assets/ financing
should the company have ?
● What level of assets should the company have?
● How should investment projects be chosen and how
should they be funded?
● In what proportions should the company’s funding
be regarding shareholders’ equity and borrowings?
● What proportions of profit should be paid out in
dividends or retained for future investment?
The management of the company has various choices,
selecting the best choice is highly important to get
funds at cheaper rate for certain purposes / assets.
Sometimes we noted that some companies are using
wrong mixtures, for instance, when asset finance are
available from banks for interest (flat rate) at 5 % to 7%
per annum normally, companies are taking business
loan/term loans at very high interest for acquiring
assets which costs 8% to 13% per annum.
Equity Financing
• Institutional Equity Investment
• Strategic Partnerships
Debt Financing
• Working Capital and Trade Finance
I. LC and TR Facilities
II. Term Loans
III. SME Finance and Business Loans
IV. Project Finance
V. Over Draft - OD
VI. Check Discounting Facility
VII. Invoice Discounting Facility
VIII. Factoring – Loans based on confirmed sales
orders or accounts receivables.
Lease Finance
• Plant, Machinery and Equipment Lease
Finance
• Lease financing for Heavy Vehicle and Fleets
The modes and various parameters by which
the banks in UAE generally lending short term
loans or facilities are tabulated below for ease of
reference.
Different types of Financing
options available in UAE
“If you think nobody cares if you’re alive, try missing a couple of installments”
- Earl Wilson
3

4. WORKINGCAPITALFACILITIESAVAILABLEINMAJORBANKSINUAE
BANKS PRODUCT AVAILABLE TO TYPES OF BUSINESS ENTITIES FINANCED
MAX. BUSINESS LOAN
AMOUNT *
TENOR -
BUINESS
LOANS
MIN.
LENGTH
OF TIME IN
BUSINESS
MIN. ANNUAL
TURNOVER FOR
BUSNICESS LOANS
MIN. ANNUAL
TURNOVER FOR TRADE
FACILITY **
ADCB
Insta loans
UAE nationals and expats All UAE-registered legal entities Dh1.5m 48 months 2 - 3 years Dh1m Dh15 Million and above
Trade finance facility
ADIB
BUSINESS
Small business finance UAE nationals and
expats
Industries: trading, services, manufactuing,
transportation & logistics, and contracting Entities:
LLC,Sole proprietorship,FZC, Partnership,
Up to Dh2m Up to 48 months 1 - 3 years Dh1m Dh15 Million and aboveTrade finance facility
CBI Business Finance UAE nationals and expats Sole proprietorship, LLC,FZE,FZC Dh500,000 36-60 months 2 years Dh1m N/A
FIRST GULF
BANK
Medium-term business
finance UAE nationals and expats
Free zone companies, Limited liability companies
and Sole proprietors
Dh10m 12-48 months 1 - 3 years Dh1.2m Dh15 Million and above
Trade finance facility
NOOR TRADE
Business Finance Expat and national-
owned companies
All business holding valid trade licence Dh3m 12-48 months 2 years Dh2m N/A
UAB-SME
Business Finance
UAE nationals and expats All UAE-registered legal entities Dh1.5m 48 months 3 years Dh2m Dh15 Million and above
Trade finance facility
UNB Commercial SME loan UAE nationals and expats
All except hotels, brokerage companies and real state
companies
Dh2m 60 months 1 year Dh1.5m N/A
NBF
Medium-term business
finance UAE nationals and expats
Free zone companies, Limited liability companies
and Sole proprietors
Dh1.5m 12-48 months 1 - 3 years Dh 2 m Dh15 Million and above
Trade finance facility
MASHREQ
Medium-term business
finance UAE nationals and expats
Free zone companies, Limited liability companies
and Sole proprietors
Dh1.5m 12-48 months 1 - 3 years Dh2 m Dh15 Million and above
Trade finance facility
DIB
Medium-term business
finance UAE nationals and expats
Free zone companies, Limited liability companies
and Sole proprietors
Dh1.5m 12-48 months 1 - 3 years Dh2 m Dh20 Million and above
Trade finance facility
EIB
Small business finance
UAE nationals and expats
Industries: Trading, Services, Manufactuing,
Transportation & logistics, and Contracting Entities:
LLC,Sole proprietorship,FZC, Partnership,
Up to Dh2m Up to 48 months 1 - 3 years Dh2 m Dh15 Million and above
Trade finance facility
RAK Bank
Business Finance
UAE nationals and expats All UAE-registered legal entities Dh 2.5 m 60 months 1 - 3 years Dh2.5 m Dh15 Million and above
Trade finance facility
ENBD
Business Finance
UAE nationals and expats All UAE-registered legal entities Dh 1 m 60 months 1 - 3 years Dh2 m Dh15 Million and above
Trade finance facility
CBD Trade finance facility UAE nationals and expats
Free zone companies, Limited liability companies
and Sole proprietors
N/A N/A 3 years N/A Dh25 Million and above
CITI Bank Trade finance facility UAE nationals and expats
Free zone companies, Limited liability companies
and Sole proprietors
N/A N/A 3 years N/A Dh40 Million and above
AL HILAL
BANK
Business Finance UAE nationals and expats All UAE-registered legal entities Dh1.m 48 months 2 years Dh2 - 3 m N/A
* Subject to change as per bank norms.
** Turnover ceriteria again depends nature of business.
4 5

5. STEPS TO SEE - WHILE GOING FOR LOANS/BANK FACILITIES
STEPS
TO
SEE
–
WHILE
GOING
FOR
LOANS/BANK
FACILITES
FUND
REQUIRED
FOR
BUSINESS
?
NO
YES
OWN
FUND
AVAILABLE
?
NO
YES
MINIMUM
CRITERIA
FOR
LOANS/FACILITIES
MET?
CHOOSE
THE
LEAST
COST
FACILITY
WITH
GOOD
QUALITY
SERVICE
-­‐
FOR
A
PERFECT
BANKING
PARTNER
SEE
OPTIONS
AVAILABLE
IN
VARIOUS
BANKS
AWARE
OF
BANK
SUPPORT/SERVICE
S
S
UNDERSTAND
THE
CRITERIA
TO
BE
MET
NEGOTIATE
WITH
BANKS
STUDY
THE
TERMS
&
CONDITIONS
OF
BANKS
ENSURE
SUITABILITY
TO
COMPANY’S
REQUIREMENT
ANALYSE
AND
COMPARE
TOTAL
COSTS
(INTEREST
&
OTHER)
OF
EACH
FACILITY
OPTIONS
BY
BANK
6

6. Being one of the closely related countries, the trade relationship between India
and UAE has significantly developed over the last 20 years. The business ties
have grown stronger by exchange of culture, commodities and ideas. It started with
the barter of pearls for cotton and dry fruits for grains many years ago. Today India
– UAE bilateral trade is close to US$75 billion (Dh275.5bn), making the UAE one of
India’s leading trade partners.
UAE mainly imports gems and jewelry, vegetables, fruits, spices, etc from India. UAE’s exports to India
mainly include crude & petroleum products, gold & silver, pearls, etc. Growing Indo-UAE economic
and commercial relations contribute valuable stability and strength to bilateral relationship between
the two countries. The UAE enjoys a broad and comprehensive economic relationship with India,
based on mutual interests.
COUNTRY IMPORT EXPORT
INDIA
Crude, petroleum products, gold
& silver, pearls, precious and
semi precious stones, metal ores
& metal scrap, electronics goods
and transport equipment.
Gems and jewelry, vegetables, fruits, spices,
engineering goods, tea,
meat and its preparation, rice, textiles and
apparel and chemicals.
UAE
Gems and jewelry, vegetables,
fruit, spices, engineering goods,
tea, meat and its preparation,
rice, textiles and apparel and
chemicals.
Crude, petroleum products, gold & silver,
pearls, precious and semi precious stones,
metal ores & metal scrap, electronics goods
and transport equipment.
Susovan Sarkar
Asst. Manager - Audit and Assurance
India is expected to become UAE’s biggest export destination by 2030, with a forecast for estimated
goods at 14%. Increased inward investment from the UAE could help India to create the conditions
for growth in the long term.
The main reason for strong INDO-UAE economic ties is the huge expatriate Indian population in UAE.
Almost 2 million Indian expatriates currently live and work in the UAE, comprising more than 30 per
cent of the national population and constituting the Emirates’ largest expatriate group. The profile of
the company has changed with the evolving needs of the country: In the 1970s and 1980s, when the
principal requirement here was for blue – collar workers, the Indian community was blue – collar
to the extent of 85-90%, with a negligible percentage of professionals. In the 1990s, as the need for
“ An Outlook on India- UAE
Business Interests”
7

7. professionals to meet the needs of the expanding service
sector emerged, the profile of the community changed,
and today, 15 to 20% of the Indian community is made
up of professionally qualified personnel. The Indian
community has played a major role in the economic
development of the UAE over the last 35 years. The total
remittances to India from the UAE in 2008-09 were about
US$ 10-12 billion, which is around one third of all the
total remittances from the GCC countries to India which
is around US$30 billion.
Recent political development in India has opened more doors to strengthen trade ties between
UAE and India. Both contries are working towards giving the final shape to a Bilateral Investment
Promotion and Protection Agreement (BIPPA), to enhance investments between the two countries;
the Department of Economic Development (DED), UAE has said.
The agreement is aimed at driving
investments into India from the UAE across
different sectors, including construction,
downstream manufacturing in the petroleum
and natural gas sector, as well as agriculture
and food processing.
Saed Al Awadi, CEO of Dubai Export, the
agency of the Department of Economic
Development in Dubai, was of the opinion
that “This agreement will enhance the
economic ties between the two countries
further”.
The recent decision by Abu Dhabi National
Energy Company (Taqa) to purchase two
hydropower assets in the northern State
of Himachal Pradesh, makes it the largest
private operator of hydroelectric plants in India.
Trade between the two regions has grown quickly, reaching US$75 billion in 2012-2013 up from
US$43 billion in 2009-10. The two countries have been selected in the United Nations Conference
on the Trade and Development list of ‘ top 10 most promising investor economies for Foreign
Direct Investment(FDI)‘ in 2012-14. Over the next 20 years, the Indo-UAE relationships based on
increased economic and strategic cooperation are expected to become more important to the
world economy. The relationship between India and the UAE could be a leading example for
future business relations between other foreign countries.
8

8. Watching Dubai grow day by day in the field of business and commerce,
me and my friends feel proud choosing this amazing place for pursuing
our articleship training as it pave ways and open numerous doors for
excelling in the field of auditing, accounting, business valuation and so on.
Getting practice and training in such a growing economy is the dream of
every student who is looking forward to join the working community in the
nearby future.
Articleship training, the most crucial part in the Chartered Accountancy
course, plays an important role in molding the student with concrete
understanding of the subject, both practically and theoretically. Hence, the
place and firm of undergoing articleship matters a lot. Working under highly
qualified professionals is a great advantage as they impart their knowledge
on various topics making us better prepared in real life scenarios.
A business’s inventory is one of its major assets, and represents an investment
that is tied up until the item is sold or used in the production of finished
goods. It also costs money to store, track and insure inventory. Inventories
that are mismanaged can create significant financial problems for a business,
whether the mismanagement results in an inventory glut or an inventory
shortage.
Hence, in this issue, our senior, CA. Sarat Nair writes a brief article on Inventory
management for better understanding of the students.
I trust it will help gain a clear cut picture about Inventory Management and
prove prolific in your future accomplishments.
Ramadan Kareem and happy read ahead!!
S T U D E N T ’ S D E S K
Sakkira Hamza
Student Editor
9

9. As we all know, revenue
generation is one of the
primary objectives of any
business, and the purpose
behind the investment of any
entrepreneur’s hard earned
money. Inventory is one of the
primary sources of revenue generation and is
one asset that is closely monitored and managed
by an organization. Hence, Inventory control
is an attempt to balance inventory needs and
requirements with the need to minimize costs
resulting from obtaining and holding inventory.
WHY KEEP INVENTORY?
• TO KEEP OPERATIONS RUNNING
When it comes to manufacturing entities, it is
vital that the manufacturer has certain items
purchased and stocked in order to manufacture
its product. As the end product is dependent
on the work centers and the inputs involved in
each of them, insufficiency in any one of the
centers will hinder the smooth running of the
entity’s regular operations.
• TO MANAGE LEAD TIME
Lead time is the time that elapses between the
placing of an order and actually receiving the
goods ordered. This means that if the lead time
of a product is three months, a firm will have
to maintain inventory and place orders for the
product at least three months in advance of their
need. The longer the lead time, the larger the
quantity of goods the firm will have to carry in its
inventory.
• HEDGING
Inventory can also be used as a hedge against
price increases and inflation. Firms usually take
advantage of a situation where prices are set
to increase, by purchasing extra quantities of
materials at a lower price and keeping excess
inventory of the same.
• QUANTITY DISCOUNT
Often firms are given a price discount when
purchasing goods in bulk. This may, on occasion,
lead to inventory which is excess of what is
currently required to meet demands. However, if
the discount is enough to set off the extra holding
costs incurred as a result of the same, the decision
of buying goods in excess is justified.
BALANCING INVENTORY AND COSTS
As stated earlier, inventory management is an
attempt to maintain an adequate supply of goods
while minimizing inventory costs. Given the
reasons we require to keep adequate supply of
inventory, it is essential to validate the same with
the costs incurred in the process. Let’s take a look
at the different costs that are involved.
Inventory Management
CA. Sarat Nair ACA.
Asst. Manager - Audit and Assurance
10

10. • HOLDING COSTS
Holding costs, also called carrying costs, are
the costs that result from maintaining the
inventory. If the inventory held by the firm is in
excess of current requirements, then the cost of
maintaining the inventory will be high.
Maintenance costs include storage costs,
personnel costs to handle the goods, power
and electricity expenses for the storage facilities
as well as loss due to pilferage, shrinkage and
obsolescence.
• PURCHASING COST
Simply put, purchasing cost is the cost of the
purchased goods. If the firm purchases a
material that goes into its finished product, the
firm can determine its annual purchasing cost
by multiplying the cost of one purchased unit
by the number of finished products demanded
in a year.
SCHOOLS OF THOUGHT IN
INVENTORY MANAGEMENT
• JUST-IN-TIME (JIT)
Just-in-time (JIT) is a philosophy that advocates
the lowest possible levels of inventory. It
involves keeping inventory in the right quantity
at the right time with the right quality. The ideal
lot size for JIT is ‘one’, even though one hears
the term “zero-inventory” used; which implies
no excess inventory.
• THEORY OF CONSTRAINTS (TOC)
Theory of constraints (TOC) is a philosophy which
emphasizes that all management actions should
center on the firm’s constraints. While it agrees
with JIT, that inventory should be at the lowest
level possible in most instances, it advocates that
there be some buffer inventory when it comes to
the bottlenecks before finished goods.
THE FUTURE OF INVENTORY
MANAGEMENT
Passing times and dynamic management
techniques has added new dimensions to
inventory management. It has expanded the
concept from mere stock-in-hand of raw
materials, work-in-progress and finished
goods, to broader classifications such as scrap,
returned goods, reusable or recyclable products
and products that require repairs and services.
This promotes the implementation of new and
innovative policies, such as JIT & TOC as seen
above, which helps highlight the importance of
inventory management in current times.
11

11. Corporate Office: Suite 503 , Wasl Business Central, Port Saeed,P.O. Box: 122957, Dubai, UAE.
Tel: +971 4 2500290, Fax : +971 4 2500291, info@emiratesca.com, www.emiratesca.com
Disclaimer
The views and opinions expressed in The Emirates Chartered Accountant Newsletter are those of authors only and not
necessarily the opinion of Emirates Chartered Accountants Group.
Copyright © 2014 Emirates Chartered Accountants Group. For Private Circulation only.
Locations: Dubai, Sharjah, Ajman, RAK, Abu Dhabi, London
The Group Entities: United Auditing, IEC Emirates Chartered Accountants Co., Emirates Chartered
Accountants, Emirates Accounts Services UK
12