Getting heavy with the bouncers

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Fifteen years ago, we faced the same issues. We had discussions with the municipality, nothing happened. We had discussions with the Central Bank, nothing happened. Then an order was issued by HH Sheikh Mohammed to play this role in curbing the problem," said the Dubai Police General Commander His Excellency Lt General Dhahi Khalfan Tamim. He is of course referring to the growing credit risks that banks and companies in the UAE continue to face. Last Wednesday, however, the UAE‘S first credit bureau, Emcredit, was launched, offering banks, companies and individuals precise information on borrowers.

So how will this help curb the issue of bouncing cheques?

Lt General Tamim noted that the number of reports issued from the Dubai Police on bounced cheques had risen from 11,383 in 2002 to 16,715 in 2006. The police department's agreement with Emcredit, however, will break ground for the launch of Embounce, a new service specifically dedicated to providing clear and updated records on defaulted cheques reported to Dubai Police. This will enable lenders and various businesses to assess the risks associated with borrowers and partners by accessing their previous records in honouring cheques.

The move is expected to boost the level of transparency in the local financial and security sectors, one of the main objectives laid out in the Dubai Strategic Plan 2015.

"In a fast-growing economy like Dubai, curbing financial offences is a key priority for us in order to safeguard the interests of the financial and commercial sectors and the people of Dubai. Cheque offences place a large burden on the police and public persecution departments," said Lt General Tamim.

He added that Embounce would allow creditors to better assess the credit worthiness of a cheque issuer and, in the long run, reduce the incidence of dishonoured cheque offences. The number of borrowers from banks and financial institutions has increased dramatically over the past few years in the country. The reason behind this, Lt General Tamim believes, are the increasingly luring incentives offered by banks to borrowers and the extreme ease with which you can obtain a personal loan or mortgage, for example, with borrowers in many cases failing to pay back the full amount. As a result, those institutions end up running to the police for help.

Certain cases have proved difficult for the police to follow up. Lt General Tamim recalls a particular case, in which a foreigner arrived in Dubai, obtained a visa, set a bank account and was given a cheque book. He then proceeded to produce cheques as payment in different retail outlets including jewellery stores. After succeeding in buying incredible amounts of assets the cheques bounced. This resulted in issues with the bank involved as well as the business owners affected by the scam.

With Dubai Police's data shared with Emcredit and updated daily, this is bound to change, claim those backing Emcredit.

"Everyday, thousands of businesses make decisions based on an individual's or a company's credit history, making it vital for organisations to have access to accurate and comprehensive credit information that supports their decision-making capabilities," said Ali Ibrahim, board member and director of Emcredit and deputy director general of Dubai Department of Economic Development (DED).

Mohammed Ali Alabbar, director general of Dubai DED and chairman of Emcredit is optimistic with the services offered by Emcredit, saying that they will "translate into better opportunities and better access to credit, which in turn will enhance their performance and spur further growth in the economy of the United Arab Emirates".

Debt levels have been rapidly rising throughout the UAE. Bankers have reported that the average indebtedness of a UAE national reaches up to US$40,800 and approximately US$27,200 for expatriates. Personal loans in the UAE have increased by 13.2% last year, reaching US$7.4bn whereas loans obtained for business purposes have doubled to US$19.2bn in 2005, from US$9.7bn in 2004.

In many cases, expatriates tend to leave behind their credit history when returning to their home countries. Debt collection companies are then hired in cases of large outstanding debts to track down the borrowers in question.

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Embounce
Posted by Rodger Clarke, Dubai, UAE on Monday 25 June 2007 at 08:00 UAE time


The best way to reduce the number of bounced cheques would be to stop banks and finance companies taking undated "security cheques". It is a crime in the UAE to write a cheque without having sufficient funds to cover it, but logically a borrower cannot possibly know if he will have sufficient funds available at an undetermined point in the future. The banks are therefore no better than accessories to criminal activity. If you take away this tool of extortion and bullying from the banks you will sudedenly see them become a lot more responsible about who they lend money to!

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