Strong economic fundamentals of United Arab Emirates (UAE) has rebuilt confidence among banks as they have started increasing lending to small and medium size companies. Lenders adopted protectionist approach some time ago given to tumbling position of real estate sector and falling debt recovery.

Abu Dhabi Commercial Bank PJSC, the country's third-biggest bank by assets, increased lending to SMEs by 25 per cent according to Colin Fraser, the company's Abu Dhabi-based head of wholesale banking. Nick Levitt, HSBC's head of U. A. E. commercial banking said that it aims to generate 40 percent of its commercial banking revenue from SMEs.

Demand for funds have increased from small companies in the recent past as they are looking forward to tap growth potential from the regional market. Small firms effectively weathered the shocks of financial crisis given to their better management and cautious investment approach.

John Tofarides, a Dubai-based analyst at Moody's, said, "Lending to SMEs however, could be viewed as riskier due to the inferior transparency and visibility of accounts, compared with larger corporations, which have external auditors and certain governance structures in place."