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Thu 29 Jul 2010 06:58 AM

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22% of UAE expats unable to meet loan, credit card payments

Datamonitor research revealed as more banks seen targeting Emiratis as customers.

22% of UAE expats unable to meet loan, credit card payments
BANK TARGET: Banks are seen targeting more Emirati customers who are seen as less of a risk for lenders. (Getty Images)

More than a fifth of UAE expats were unable to meet loan or credit card payments over the past year, research from Datamonitor has showed.

The level for defaults for UAE nationals was marginally lower at 19.7 percent, compared to 22.1 percent for foreign customers, it was reported on Thursday.

As a result, banks are vying to attract more Emirati customers as better job security and bigger salaries make them less of a credit risk to lenders, UAE daily The National reported.

So-called profiling of customers based on their country of origin and also their credit history is expected to increase as banking checks become more sophisticated in the UAE, the paper added.

“In this market there’s opportunities for different rates based on the profiling of consumers and as banks look to better understand their client base there will be opportunities for increasing profitability going forward,”  said in commRichard Adams, a consulting analyst at Datamonitor said in comments published by the paper.

Although Emiratis have historically chosen to bank with local lenders, both local and international banks are expected to increasingly compete for their services, the paper said.

Some foreign banks are reducing mortgage rates and offering better car loans to attract clients, Janany Vamadeva, a banking analyst at Al-Futtaim HC Securities, told the National.

Some banks were forced to write down debts linked to the thousands of expatriates who left the country after a wave of job losses and a collapse in the country’s property market.

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His Excellency Dr Paul 10 years ago

A marginally better default rate (19.7% to 22.1%) is not a good reason for banks to target Emiratis, despite what they might say. The real reason is undoubtedly the fear that expats will skip the country, something an Emirati is unlikely to want to do.

Naman 10 years ago

Considering the base figure effect, banks should do the reverse of it. They should target expats rather than emiratis since the base population figure of emiratis is very less compared to expats. Its percentage bias but on further digging these figures one can easily say its risky to lent those in 19.7% bcoz of low base figure.

nigel 10 years ago

they should noy just target people because they are not quite as bad as someone else!!! this is how the problems started in the first place. when will the banking system grow up in this country?? why dont they do credit checks on people and only target the people who are going to pay it back??

SF 10 years ago

Banks share the responsibility & must assist customers to repay by rescheduling taking into consideration; lower incomes, revenue, higher costs. Currently customers face more difficulty with increased charges, penalties resulting in snowballing debt; Face reality & assist customers to reschedule & pay back in full. Currently the only option offered by banks is - They cannot do anything - Only options are 1) Payback in full 2) Default & go to jail Like the corporates individual customers also need to be assisted as they face more difficulty. If reality of the global economic crisis if faced & customers are assisted there will be less defaults. I pray & hope relief & assiatance will be given to individual customers - to pay back in full : Currrently there is no option

Golden Dragon 10 years ago

"Face reality & assist customers to reschedule & pay back in full. Currently the only option offered by banks is - They cannot do anything - Only options are 1) Payback in full 2) Default & go to jail " I think you missed out to post the 3rd option (which many did) - "Leave the country to avoid jail"( Not to forget to use your credit at the duty free to exhaust any balance amount

alex 10 years ago

It's pretty astonishing that one group of customers get their education, house, wedding and healthcare paid by the State and tend to get cushy government jobs at inflated salaries and the other group does not. However, the level of defaults are almost the same (19.7 v 22.1 is a tiny difference). Being in mind the above, common sense suggests that the expats are getting into debt dealing with day-to-day expenditure whereas the locals are doing so to obtain luxuries. A sensible bank would probably be more concerned by the latter.

ExpatHog 10 years ago

I just wonder how many non uae national customers are defaulting or struggling because either they or their employers have not been paid by their uae national clients or employers.Somehwat ironic .......

Dorothy 10 years ago

This is not an exclusive problem to the UAE, it is a problem where ever the issue of credit card or loans are given. I lay partial fault in the lender and issuers of credit cards. Credit of any kind is a privildge and must be supported with much integrity on both sides. Lenders (banks) not only have to work out budgets with potential users and borrowers, but assess the borrower's ability to meet payment. Demanding payment in full is rather redundant if the person cannot make one or more payments. What purpose does jail serve to recover money? Does it not cost the Government to incarserate debters, as well? Starting with a small sum to establish credit with the lender for first time borrowers will insure lender profit and help to establish credit for borrower. Most of us have needed financial help at one time or another. Any person who needs financial help must do their homework in all areas of borrowing, and do so with understanding, reading the fine print, is there any loss of job or sickness insurance? My son is in the banking business. He has told me that the hardest matter to handle is when the borrower avoids him when they default. Better to come in and talk with him to see if there is a way to solve problems. Avoiding only causes further problems, and attachment of wages or property. Working together may produce a solution. This is just my humble opinion, I am ignorant of most of UAE's banking policies, therefore I mean no disrespect to any person, government or institution. Thank you

Mudassir 10 years ago

Banks are forcing/frustating people to take LOAN/CC, so they are responsible for this.

Albert Wynn 10 years ago

It is sad and appalling to see that greed is the bearer of the torch in many parts of the world. When bankers and lenders are doing great at the expense of the client with revenue and profits continuing to grow, come and get it is the limit. All types of financial instruments are created to lure in that faithful client. Along with this comes the the following: 1) Remember we understand and we are here to help you; 2) Don't worry we are all about helping our customers and clients with affordable loans; 3) Remember you are in good hands with our great financial team who can help you prepare for the future now; 4) Loans are out business and we take every care to ensure that our customers and clients receive the best treatment, etc., etc. , etc. However, now that markets and economies around the world are in a downturn with a slow, but returning economy, bankers and lenders demanding that customers and clients repay their loans on demand now! They do not remember anything about being their to help you and you family or business. It was all about greed and now greed only promotes more greed. Most of the customers and clients do want to pay back their loans. Some of these companies and individuals have been long standing customers and clients with excellent records of account, but this is not even a consideration. Yet when the economy is doing great, her they are just calling and mailing wanting to know how can they help you. Why don't you come in so we can talk about your needs and how we can help. This is all mistrust on part of the financial institutions. What about the millions of losses they incurred while investing the investments of those same customers and clients. All the banker can say is, well they knew their was risk of loss, so that's that. Now where is the repayment of our loan. We will have you arrested and thrown in jail if you do not pay now. For those bankers and other financial institutions who seek to share in the heartache and pain of their customers and clients who truly want to make arrangements through restructure to repay with help and consideration from the lenders will create a win-win situation and perhaps gain the golden trust factor with clients and customers who will be their for them as loyal and lasting future clients and customers. The financial instutions that take the lead and stand outside the box to rethink there present stand will be the ones to prosper with success in the future.