For achieving the Central Bank of the UAE’s objectives, the Decretal Federal Law No. 14 of 2018 Regarding the Central Bank & Organization of Financial Institutions and Activities permits the Central Bank to establish policies, and issue regulations and, as required, standards and guidelines relating to Licensed Financial Institutions.

In issuing this Regulation, the Central Bank is seeking to enhance access to Financial Products or Services for small and medium-sized enterprises (SMEs) in the UAE, through promoting appropriate market conduct by Licensed Financial Institutions when dealing with SME Customers.

This Regulation is issued pursuant to the powers vested in the Central Bank by the Decretal Federal Law No (14) of 2018 regarding the Central Bank and Organization of Financial Institutions and Activities.

The Regulation seeks to promote a culture within Licensed Financial Institutions of dealing with SMEs by defining the obligations of Licensed Financial Institutions when dealing with SME Customers that include:

• Setting standards of business and market conduct by Licensed Financial Institutions;
   
• Strengthening the governance and oversight over the design, promotion and sale of Financial Products and/or Services;
   
• Promoting responsible financing practices;
   
• Ensuring the quality and timing of effective disclosure to SME Customers by Licensed Financial Institutions regarding matters and/or risks that may affect an SME Customer’s decision to purchase a Financial Product and/or Service;
   
• Providing SME Customers with the access to the right information at the right time to make informed decisions;
   
• Promoting access to banking facilities for SMEs;
   
• Implementing clear and reasonable mechanisms by Licensed Financial Institutions for redress of SME Customer Complaints;
   
• Implementing appropriate debt counselling for SME Customers.

This Regulation applies to all Banks and Finance Companies licensed by the Central Bank in relation to their activities specified in Article 65 of the Decretal Law No. 14 of 2018 Regarding the Central Bank & Organization of Financial Institutions and Activities in provision of Financial Products and/or Services to SMEs.

Where this Regulation includes a requirement to provide information or take certain measures or to address certain items listed as a minimum, the Central Bank may impose requirements that are additional to the listing provided in the relevant Articles.

The Central Bank may issue further requirements relating to this Regulation.

Authorised Agent: a commercial representative of a Licensed Financial Institution, which undertakes to enter into transaction in the name and for the account of, the Licensed Financial Institution. The Licensed Financial Institution shall be liable for any actions, transactions and contracts entered into by the authorised agent.

Bank: a juridical person licensed in accordance with the provisions of the Decretal Federal Law No. (14) of 2018 Regarding the Central Bank & Organization of Financial Institutions and Activities, to primarily carry out the activity of taking deposits, and any other Licensed Financial Activities.

Bank Account: for the purposes of this Regulation, a Bank Account is a transactional basic business bank account that allows the making of payment, deposit and withdrawal of funds.

Board: a Licensed Financial Institution’s Board of Directors (Owners/Partners in the absence of a Board of Directors).

Borrower/Financee: a Customer to which a Licensed Financial Institution provides Credit as a Service and/or Product.

Central Bank: the Central Bank of the United Arab Emirates.

Central Bank Law: Decretal Federal Law No. (14) Of 2018 Regarding the Central Bank & Organization of Financial Institutions and Activities and its amendments

Complaint: an expression of dissatisfaction by a Small to Medium sized Enterprise with a product, service, policy procedure or action by the Licensed Financial Institution that is presented to the Licensed Financial Institution in writing or verbally.

Compliance of an IFI with Islamic Shari’ah refers to compliance with Shari’ah in accordance with:

1. resolutions, fatwas, regulations, and standards issued by the Higher Shari’ah Authority (“HSA”) in relation to licensed activities and businesses of IFIs (“HSA’s Resolutions”); and
    
2. resolutions and fatwas issued by Internal Shari’ah Supervision Committee (“ISSC”) of the respective IFI, in relation to licensed activities and businesses of such institutions (“the Committee’s Resolutions”), provided they do not contradict HSA’s Resolutions.

Customer: for the purpose of this Regulation, a Customer is a Small to Medium Sized Enterprise as herein defined who obtains or may prospectively obtain Financial Services and/or Products, with or without charge.

Credit Information Agency: Al Etihad Credit Bureau and any credit information agency established for the purpose of credit reporting requirements.

Credit products: products that provide funding including any advance, loan/financing or other facility in whatever form, including the giving of a guarantee or undertaking of any surety obligation for a Customer.

Fee: any fees, charges, penalties and commissions incurred on a Product and/or Service.

Finance Company: any juridical person licensed in accordance with the Finance Companies Regulation issued via Circular No. 112/2018 on 24/04/2018.

Financial Crime Compliance: includes compliance with, but not limited to, all applicable fraud, anti-money laundering, counter-terrorism financing, sanctions, bribery and corruption laws, rules and regulations.

This Regulation does not impose, reduce or modify any requirements pertaining to the compliance with all laws, rules and regulations relating to Financial Crime Compliance.

Financial Products and/or Services: Products and/or Services (including stored value facilities) provided by Licensed Financial Institutions, with or without charges, through their financial activities. It will be referenced to as Products and/or Services in this Regulation.

Higher Shari’ah Authority (HSA): The Central Bank’s Higher Shari’ah Authority for financial and banking activities, formed by virtue of the Cabinet’s Resolution No. (1/و5/102) of 2016 and referred to in article 17 of the Central Bank Law

Internal Shari’ah Supervision Committee (ISSC): An independent committee established within each Licensed Financial Institution that carries on all or part of its activities and businesses in accordance with the provisions of Islamic Shari’ah. Membership of this committee shall consist of experienced specialists in Islamic financial and banking transactions jurisprudence. The said committee shall undertake Shari’ah supervision of all businesses, activities, products, services, contracts, documents and conduct of business charters of the concerned institution and shall approve them and establish their respective Shari’ah requirements, within the framework of the rules, principles and standards set by the Higher Shari’ah Authority, in order to ensure compliance thereof with Shari’ah Fatwas or opinions issued by the Committee shall be binding.

Islamic Financial Institution (IFI): the Licensed Financial Institution that carries on all or part of its activities and businesses in accordance with the provisions of Islamic Shari’ah.

Licensed Financial Activities: The financial activities subject to Central Bank licensing and supervision as specified in Article (65) of the Central Bank Law.

Licensed Financial Institutions: Banks and Finance Companies licensed in accordance with the provisions of the Central Bank Law to carry on a Licensed Financial Activity or more, including those which carry on the whole or a part of their business in compliance with the provisions of Islamic Shari’ah, and are either incorporated inside the State, or have branches, subsidiaries or representative offices inside the State.

Market: the financial Market where Licensed Financial Institutions promote and/or sell Financial Products and/or Services and compete for Customers who are SMEs.

Market Conduct: Market Conduct is the focus on Licensed Financial Institutions' Market place actions, behavior and practices that are applied in providing Financial Products and/or Services to the market.

Permissible: any action that is specifically permitted by regulation or standards, or any actions which the Consumer is allowed by laws, rules and regulations to agree to and is confirmed by expressed consent.

Regulation: any resolution, legislation, circular, rule, instruction, standard or notice issued by the Central Bank.

Senior Management: the executive management of the Licensed Financial Institution responsible and accountable to the Board (or Owner/Partners where there is no Board of Directors) for the sound and prudent day-to-day management of the Licensed Financial Institution, generally including, but not limited to, the chief executive officer, chief financial officer, chief risk officer and heads of the compliance and internal audit functions.

Small to Medium Sized Enterprises: For the purposes of this Regulation, the words and acronym SME includes small, micro and medium businesses, provided that the businesses meet the thresholds of employee headcount and turnover, as defined by the Federal Cabinet Resolution No. 22 of 2016 which sets out the Small to Medium sized Enterprise definition for the purposes of Federal Law No. 2 of 2014 or any subsequent amendments to the Federal laws defining a SME:

1. Medium Enterprise:
   Trading Sector 51 – 200 employees; or < AED 250 million annual revenues; Manufacturing Sector 101 – 250 employees; or < AED 250 million annual revenues; Service Sector 51 – 200 employees; or < AED 200 million annual revenues.
    
2. Micro Enterprise:
   Trading Sector < 5 employees; or < AED 3 million annual revenues; Manufacturing Sector < 9 employees; or < AED 3 million annual revenues; Service Sector < 5 employees; or < AED 2 million annual revenues.
    
3. Small Enterprise:
   Trading Sector 6 – 50 employees; or < AED 50 million annual revenues; Manufacturing Sector 10 – 100 employees; or < AED 50 million annual revenues; Service Sector 6 - 50 employees; or < AED 20 million annual revenues.

Staff: one or more employee(s) of the Licensed Financial Institution or third parties acting in any capacity for or on behalf of the Licensed Financial Institution.

1. 2.1 Licensed Financial Institutions must provide information in a proactive and transparent manner to allow a Customer sufficient time to understand the information, including the terms and conditions.
    
2. 2.2 All information on products and services aimed at and for Customers must have clear, transparent and consistent disclosures and comply with all applicable documentation requirements.
    
3. 2.3 Licensed Financial Institutions must use plain language, information that is accessible and communicated in terms that are easily understandable. Licensed Financial Institutions must also use specific disclosure mechanisms, including warnings, to inform Customers of the key characteristics of and limitations on, accounts and other Financial Products or Services, including and not limited to risks, costs, fees, interest or profit rates, penalties, commitments to donate, tenure and locked terms relating to any Financial Product or Service.
    
4. 2.4 Licensed Financial Institutions must provide effective disclosures at all stages of the relationship with the Customer. Customers must be made aware in advance of any permissible change in terms and conditions through all stages of the relationship.
    
5. 2.5 In case of rejection of a Customer’s application for a Financial Product and/or Service by the Licensed Financial Institution, the Licensed Financial Institution must disclose the reason for rejection to the applicant except where the reason of rejection is related to Financial Crime risks or as may be prohibited by law.
    
6. 2.6 Licensed Financial Institutions must not provide only partial or biased disclosure to entice a Customer by limiting the initial disclosure material that only presents the positive aspects of the product and/or service and only then disclosing the full characteristics of the product at the point of sale or post-sale, a point at which the Customer may feel obligated to complete the transaction(s) or do not have a recourse to exit the Product and/or Service post-sale.
    
7. 2.7 Licensed Financial Institutions must regularly monitor and improve the effectiveness of their disclosures with techniques including and not limited to SME Complaint analysis and Customer satisfaction surveys.
    
8. 2.8 Information must be available in both English and Arabic.
    
9. 2.9 Licensed Financial Institutions should provide Customers with the signed documentations and contracts within a reasonable time.
    
10. 2.10 Licensed Financial Institutions must ensure the accuracy of all disclosures made including the verification and correctness of statements made in such disclosures and any related calculation, assumption or reference.
     
11. 2.11 Licensed Financial Institutions must promote, sell, distribute and manage Financial Products and/or Services in a responsible manner. Licensed Financial Institutions must take necessary steps to ensure that Customers are made aware of and understand the proposed terms and conditions prior to the final stage of the sales process or the time of signing of the agreement.
     
12. 2.12 Licensed Financial Institutions must be transparent in their pricing and product structure.
     
13. 2.13 A Licensed Financial Institution’s Board and Senior Management are responsible for providing direction and oversight to ensure that good disclosure practices for Financial Products and/or Services relating to SMEs are adopted throughout the institution.

1. 3.1 Licensed Financial Institutions must monitor and uphold high ethical standards and practices when dealing with Customers.
    
2. 3.2 Licensed Financial Institutions must prohibit and prevent abusive sales, marketing and pricing practices.
    
3. 3.3 Licensed Financial Institutions must ensure disclosure, transparency and avoid anti-competitive and discriminatory practices and at all times have the controls in place to identify and manage conflicts of interest.
    
4. 3.4 Licensed Financial Institutions must provide Customers with accurate, sufficient and consistent information for Customers to easily understand and to be able to compare products and/or services with those offered by other Licensed Financial Institutions.
    
5. 3.5 Licensed Financial Institutions must not impose practices or barriers that prevent Customers from easily switching their relationship(s) between Licensed Financial Institutions at reasonable and disclosed costs and within a reasonable timeframe.
    
6. 3.6 Licensed Financial Institutions are encouraged to engage with and put in place appropriate interface mechanisms with all available SME support schemes (such as credit guarantee schemes, movable collateral registry system or SME credit scoring services) provided by any Federal or Emirate-level government agencies and development banks.
    
7. 3.7 Licensed Financial Institutions must ensure that all Authorised Agents comply with the applicable Articles of this Regulation.
    
8. 3.8 Licensed Financial Institutions must, with due skill, care and diligence, act fairly, honestly and professionally in their relationship with Customers.
    
9. 3.9 Licensed Financial Institutions must establish and maintain effective policies, procedures, systems and controls to avoid any potential, perceived or actual Conflict of Interest.
    
10. 3.10 For inherent conflicts of interest, Licensed Financial Institutions must have controls in place and must provide full and proper disclosure to Customers prior to any agreements or commitments.
     
11. 3.11 Licensed Financial Institutions must ensure ethical behavior of staff towards Customers by developing an internal code of conduct for the staff, providing regular relevant training and monitoring Complaints.
     
12. 3.12 Licensed Financial Institutions must ensure that the staff who directly interact with Customers will competently, efficiently and professionally discharge their duties and provide prospective and existing Customers with the information and services they are entrusted to provide or sell.
     
13. 3.13 Licensed Financial Institutions staff dealing with Customers must have sufficient knowledge of the products and/or services being offered.
     
14. 3.14 Licensed Financial Institutions must ensure that staff dealing with Customers are suitably qualified to provide advice and carry out transactions.
     
15. 3.15 Licensed Financial Institutions are responsible for the actions of their staff. Licensed Financial Institutions’ must maintain appropriate monitoring of staff in relation to their standards for business conduct and to ensure full compliance with codes of conduct, laws and regulations.
     
16. 3.16 Licensed Financial Institutions must not adopt abusive or unreasonable contractual terms.
     
17. 3.17 Licensed Financial Institutions must monitor for misleading or aggressive sales practices and exploitation of Customers due to their vulnerabilities, apathy or lack of knowledge.
     
18. 3.18 Licensed Financial Institutions must provide impartial credit counselling services to their borrowers/financees who face difficulties with servicing their debt.
     
19. 3.19 Licensed Financial Institutions must establish clear standards and procedures that prohibit excessive pressure on Customers in collection of repayments or debts due.

1. 4.1 Licensed Financial Institutions must not charge unreasonable fees for the SME products or services.
    
2. 4.2 Licensed Financial Institutions must not provide credit beyond amounts that the Customer is capable to service.
    
3. 4.3 Licensed Financial Institutions must not grant or extend any form of credit without expressed and documented prior request by the Customer.
    
4. 4-4 Licensed Financial Institutions must monitor for inappropriate activities by credit granting and sales representatives. The monitoring, at a minimum, includes monitoring of monthly trend analysis of credit granted, relevant customer complaints and credit counselling.
    
5. 4.5 Licensed Financial Institutions should only provide credit after obtaining the relevant details from the Credit Information Agency.

1. 5.1 Licensed Financial Institutions must have in place a fair, accessible and transparent process provided without charge for addressing Customer Complaints, with a view to resolving Complaints in a timely manner.
2.  
3. 5.2 A Licensed Financial Institution must establish an independent Complaints management function in the organization that directly reports to the Senior Management. The function must be empowered to effectively resolve Complaints independently of other business operations.
    
4. 5.3 Licensed Financial Institutions must have an efficient and effective Complaint management system with supporting policies and procedures. The system must enable Customers to make Complaints easily and free of cost.
    
5. 5.4 Licensed Financial Institutions must take the necessary steps to ensure that Customers are made aware of their rights and responsibilities when seeking to resolve their Complaints.
    
6. 5.5 A Licensed Financial Institution is responsible for accepting and investigating all Complaints involving the activities of Authorised Agents towards Customers as well as any product and/or service sold, marketed or advertised by the Authorised Agent on behalf of the Licensed Financial Institution.
    
7. 5.6 Licensed Financial Institutions must train their Staff and Authorized Agents in handling of Complaints.
    
8. 5.7 Customers must be informed of the Licensed Financial Institution’s process for the management of SME Complaints as well as recourse to a Complaint resolution mechanism to ensure fairness, transparency and neutrality in resolving Complaints.
    
9. 5.8 Licensed Financial Institutions must utilize the data collected to conduct analysis and assess key risks and trends based on collected data. The results of the analysis must be used by the Licensed Financial Institution for conducting investigations into thematic trends, conducting root cause analysis of repeat issues and for designing new controls to address issues and improving quality and efficiency of various aspects of Customer service.
    
10. 5.9 The SME Complaints Data must be provided on a quarterly basis to the Senior Management of the Licensed Financial Institution to enable managerial level monitoring of trends and supportive decision-making and document any decisions or actions taken.
     
11. 5.10 Licensed Financial Institutions must participate in, fully co-operate with and inform customers of, any external financial Complaints resolution function (e.g. ombudsman) as established by the appropriate authorities or industry bodies.

1. 6.1 IFIs must incorporate and uphold Shari’ah principles in all aspects of their business comprised of reporting, business conduct, risk management and oversight functions.
    
2. 6.2 IFIs’ staff dealing with Customers must have sufficient knowledge of the Shari’ah aspects of the Shari’ah compliant products and/or services being offered.
    
3. 6.3 IFIs must provide customers with accurate information regarding their investment accounts including, but not limited to, the profit-sharing ratio between the IFIs and Customer and the profit distribution method.
    
4. 6.4 IFIs must be compliant with the resolutions and fatwas issued by the IFI’s ISSC in relation to licensed activities and businesses of such institution, provided they do not contradict the HSA’s Resolutions.
    
5. 6.5 Board and Senior Management of the IFIs must monitor the activities and integrate Shari’ah compliance into the IFI’s culture, processes, operation, and code of conduct.

The Regulatory Development Division of the Central Bank shall be the reference for interpretation of the provisions of this Regulation.

This Regulation shall be published in the Official Gazette and shall come into effect 30 days from the date of publication.