UAE mulls personal loan curbs

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LOAN CURBS: The UAE is concerned about the use of personal loans as leverage in property deals. (Getty Images)

The UAE central bank is considering new regulations to curb personal loans and bank lending to small businesses, according to banking industry sources.

“The central bank is concerned about the reports of use of leverage by individuals and small businesses in real estate transactions. There are talks of a tightening of regulations,” the retail banking head of a local lender told UAE daily Gulf News.

Under the existing rules, UAE nationals and expatriates can obtain a personal loan of up to 250,000 dirhams ($68,000) while UAE nationals can take out loans up to 2 million dirhams if they own a business.

According to data from the central bank, consumer loans have soared more than 55 percent since the end of 2006. Loans to individuals rose to 49 billion dirhams at the end of March, compared with 31 billion dirhams in December 2006.

Strong appreciation in real estate prices has encouraged the practice of using personal loans for real estate investments, according to a report by Al Mal Capital, a regional investment bank.

“There could be cases where individuals are over-leveraging. We support initiatives such as a credit bureau and finer regulations to curb such eventualities,” Yousuf Nasr, CEO of HSBC Bank Middle East, told the newspaper.

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