The credit-worthiness of Dubai’s consumers and businesses will be centrally monitored from next month, when the emirate’s new credit bureau is finally launched.
The project — a bid to help companies tackle bad debt and improve their access to financing — will collect information about individuals’ financial affairs, before selling it on to banks and other lenders. Currently, firms in Dubai are forced to collect credit history details of consumers and businesses individually, increasing the costs and risks of giving out loans.
“We’re ready to go,” Bashar Qallab, head of the bureau, told Arabian Business. “Our software is ready, our staff are coming in, so we’re very close to making an official announcement.”
Two years in the making, the bureau was planned as a joint venture between the economic development departments of Abu Dhabi and Dubai — their first ever such collaboration. However, Qallab said it would now be wholly owned by Dubai’s Economic Department (DED) and situated in the emirate’s international financial centre (DIFC).
The initiative was prompted by lobbying from small businesses in Dubai — many of which had had difficulty in persuading banks to lend them money.
“They [Dubai’s small and medium sized enterprise (SME) group] outlined two major issues,” said Qallab. “Firstly, the bottleneck in cash flows between businesses, and secondly, SMEs’ ability to get loans from financial institutions. The credit bureau is essentially to help banks lend more reasonably, with better risk management, to SMEs.”
He added: “We’ve done research on a lot of markets internationally, and SMEs in similar environments to Dubai report far fewer financial constraints when there is a credit bureau in operation than when there isn’t one.”
Qallab said the bureau, whose launch comes as Dubai is seeing rising consumer lending on the back of its property and retail boom, would also aim to educate the public about the problems of running up debt. “It costs the government a considerable amount of money to chase down every Tom, Dick and Harry that bounces a cheque,” he admitted. “We will be going out and doing a lot of outreach programmes to educate the public about the use of credit.
“We think the majority of people are responsible but for the ones that don’t know enough, we will go out and hold seminars on how to use credit cards and thingslike that.”
Ali Ibrahim, the DED’s deputy director general for executive affairs, said the move would also remove one barrier to the implementation of new bankruptcy laws in the UAE, where a jail term can currently be handed out for bouncing a cheque.
“The initial steps have already been taken towards a fully fledged bankruptcy law in the UAE. The establishment of a credit bureau is not a mandatory condition for this law to come into effect. However, the increasing complexity of financial markets and freedom of capital movement across the globe have underlined the crucial need for accurate and efficient credit reporting systems.”
“In addition, the credit bureau will also improve the operating environment for SMEs, by improving the availability of information about small business owners to lenders.”
Dubai follows Saudi Arabia and Kuwait in setting up its own credit bureau, while others are in the process of being established in Bahrain and Egypt. Qallab said the bureau planned to swap information with its counterparts in countries where adequate controls are in place.
“Our perspective has always been to take a wider role — not just in Dubai and not just in the UAE — but in the region as a whole,” he said. “What we will be looking to do is to look at other countries where there is equivalent data protection for people, to make sure that if we do send data overseas it’s only with the consent of the individual who is the subject of the report, and also to ensure they are protected legally.”
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