Demands for letters of credit (L/Cs) as payment guarantees are a barrier to small business development and growth in the UAE according to the owner of a business based there.

Abraham Carter, managing director of Premier Travel and Tourism, says banks that require extra guarantees on top of security deposits to process transactions with suppliers are the "biggest nuisances" for the country's small- and medium-sized enterprises (SMEs).

L/C demands

"Whenever we sign with suppliers or big companies we need a bank guarantee which freezes our money against the transaction - in addition to L/Cs from the bank," Carter told The National newspaper.

"The companies just want to check that you're legitimate - so they ask you for two forms of security," he said. But this hurts the company's cash flow, when generating enough cash to remain solvent is a major problem for SMEs anyway he added.

Doing business

Carter was one of several small business owners interviewed by the newspaper after the release of the World Bank's latest Ease of Doing Business ratings, in which the UAE was ranked first in the Arab World and 31st globally.

The World Bank found that the biggest obstacle for doing business in the UAE was the absence of legal insolvency procedures, which holds back the country's Ease of Doing Business rating according to the bank.

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