Using Trade Credit Insurance in Dubai
Because of its strategic location between Asia, Europe and Africa and its strong development and stable economy and political environment, the UAE offers optimal benefits for international trade. With this advantage, we have witnessed an increase in companies that have established their regional headquarters in Dubai. So it’s crucial for development of the UAE’s economy to protect this activities with trade instruments and risk mitigation tools like trade credit insurance.
This tools cover against the risk of non payment due to your customers’ declared or presumed insolvency. it gives you the opportunity to offer buyers attractive terms and enabling you to seize more global opportunities while protecting the balance sheet.
This security cover your entire credit portfolio, including domestic and export customers.
Financing in Dubai
Bank financing remains low in the UAE, however the recent appetite for credit protection has increased these last years. Banks seek to secure funding before they extend lines of credit.
The growth in trade credit insurance reflects the increasing activity for import and re-export in Dubai. This market in the UAE is expected to grow by 50% within two years in terms of volume of transactions covered.
Why SMEs in Dubai need Trade Credit Insurance ?
There are varieties of reasons:
Protection against default: By insuring the receivables against non-payment or late payments, companies protect their cash flow and their profit against default.
Sales Growth :
Without credit insurance many trade transactions have to be concluded on a pre-paid or cash basis .
With coverage in place, companies can sell more goods or services on credit terms.
If receivables are insured, a company can sell on open account terms with new customers or in a new international market without the risk of non-payment of commercial debt.
For exporters, this characteristic can be a major competitive advantage.
We notice that Trade credit insurance policies can enable a SME to increase sales by up to 30%.
Improved cash flows :
In the SME segment, less then 5% of the companies can access to bank loans becasue SME sector is considered as a higher risk.
One of the major reasons to subcribe a trade credit insurance policie is for obtain bank loans or for influenced the size and terms of the bank loan available to them.
On average, banks lend up to eighty percent more when the company is insured