Senior business figure's stark warning over lending

Banks’ unwillingness to lend is paralysing business in the UAE and risks prolonging the downturn, a senior business leader has warned.

Mishal Kanoo, deputy chairman of conglomerate The Kanoo Group, which has operations in everything from travel to machinery and oil and gas, heaped blame on international and local lenders in the country and said they did not ‘trust’ the companies and individuals, to whom they lend.

“Start being the backbone of the economy, because if you don’t you will crush us [business],” Kanoo said.

“If the banks don’t get over this issue of trust and start to lend, businesses will not function, they will collapse, and subsequently they won’t get paid and they will have to write it [debt] off. If banks don’t start lending you are going to have a severe, economic downturn,” he added.

Bank lending has evaporated in recent months due to a liquidity squeeze hitting businesses and the home loan market.

But there are signs the liquidity situation is improving. On Tuesday it emerged that mortgage giants Amlak and Tamweel, which both went out of business in October, will be recapitalised with government funds.

Earlier this month, HSBC reduced the minimum salary required to get a personal loan in the UAE to AED10,000 ($2,723) from AED20,000, in a further sign that liquidity is returning to the banking system.

Kanoo called on the banks to declare any losses they may have, recapitalise their balance sheets and resume lending responsibly.

“They made a major screw up in the past. If I were them, I’d declare it, write it off and move forward,” he said.

Kanoo stepped down as CEO from family run, Bahrain-based The Kanoo Group in 1997 and now focuses solely on the company’s UAE operations.

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