Market-mapping: understanding the SME landscape in the UAE

The challenge:

A large sovereign-backed investment company was looking to conduct a market-mapping exercise of small and medium-sized enterprises in the UAE. They had attempted to find information in the public domain but given the lack of publicly available data they approached Diligencia, based on previous work we had done in this area.

The client’s overall objective was to understand the dynamics of the SME environment as a precursor to creating a fund to invest in such companies in the UAE. Their specific interest was in the following areas:

• Size of the current market
• Split by geography
• Analysis of business size
• Sector split and concentration
• Birth and failure rate of businesses in the UAE

One of the major constraints for this project was the lack of available financial data for private companies in the UAE, due to the absence of financial reporting obligations as well as the patchwork of 40+ jurisdictions within the UAE where it is currently possible to register a company.

The solution:

Diligencia maintains a market-leading dataset of UAE companies, covering entity registration details, directors, ownership, licenced activities and links to other beneficial owners, government bodies, family offices and ruling families. This made us exceptionally well-placed to answer the client’s objectives, and in fact we had completed related research in the past in conjunction with Gulf Capital and MEED as part of an SME awards initiative.

Diligencia assembled a multi-disciplinary team consisting of two of our senior data scientists, the head of our Dubai office, and our commercial director to work alongside one of the leading strategy consulting firms, which had also been appointed by our client.

The project involved several phases of data research and analysis:

1. Defining the sample set – given the lack of financial data in the UAE, we used a number of ‘proxy’ characteristics to define a dataset of SMEs. These included legal form, size of board, complexity of corporate structure, among others. We ended with a sample size of around 350,000 entities which corresponded to the UAE government’s own statistics for the SME sector
   
   
2. Initial analysis – we analysed our sample to provide a range of distribution metrics including by location (emirate), legal form, registered activity and status (active / dissolved) which in turn allowed us to produce birth / death rates of companies and average longevity.
   
   
3. Further sectoral refinement – the client was keen to differentiate between family owned/managed SMEs and more recent start-ups, specifically those in the fintech space. This is not a recognised activity or entity type in the UAE, so again we undertook further analysis of companies registered to conduct certain activities such as software, technology and online services.

The result:

Despite the evident challenges around the availability of company information in the UAE, using Diligencia’s proprietary data enabled our client and its other stakeholders to gain a granular understanding of the SME landscape across the many jurisdictions that exist within the UAE. Our data and analysis provided the foundation for a detailed study of the SME landscape, and was a crucial component to their business case for creating an investment fund. The client was extremely appreciative of our work and recognised the unique insight and capability that Diligencia was able to contribute.