By Ed Attwood
Dunia CEO says the finance firm will work with indebted customers who ‘skip’.
Regional banks’ lending policies still remain strong and risk continues to be evaluated as it should, the head of the UAE’s newest finance companies has said.
“This has not been a crisis where credit decisions were bad – unfortunately some people are forgetting that,” Dunia CEO Rajeev Kakar told Arabian Business.
“Decisions went wrong at a very macro level where they bundled up all this credit and sold it as highly rated securities, but that was done by a very small section. I think bankers are still good risk managers – and not because I belong to the fraternity.”
The Dunia executive said that banks in the UAE were very capable, and that core customer propositions remained strong.
“Much of the crisis today is not about people not wanting to pay [back debt], it’s about people losing their jobs and not having the ability to pay. And why did that happen? Because people took on much more than they were ready for,” Kakar said.
“They got paid much more in a crazy world than they were really worth, and all that is now corrected. We’re getting to a new normal, a deleveraging. People are now getting paid as they should and risk is being evaluated as it should – the only thing we have to get is the confidence back.”
But Kakar agreed with the assessment that the policy of jailing debtors actually exacerbated the problem in terms of their ability to repay money.
“Actually yes, in the specific case of the UAE, if you lose your job, you don’t have more than 30 days to stay in the country. That’s 30 days to relocate your kids and furniture and then get out if you don’t find new employment – and obviously that makes it very difficult,” the Dunia CEO said.
“I think many good employers have been considerate and held people on their visas for longer, so that has helped assuage the problem. But it [the threat of jail] hasn’t taken care of their ability to pay – it’s taken care of their intent to pay.”
The executive said that he understood why some people left the country and was prepared to work with clients who had taken that option.
“Of course, ideally we would not like that, but where it has happened, it has happened, and people are coming back [to continue paying off their debts],” Kakar added.
“We also have a process of following up too. We can trace a person and get the money back…it’s not perfect, but then if it was perfect, it wouldn’t get us a premium.”
Kakar also revealed that certain periods during the year were seen as milestones, or obvious periods where people go missing.
“Right now, we’re going through a period where a lot of people are moving. Typically, when the school year ends, there will be companies that have held onto people until this time. That’s an obvious timeframe when people can leave,” he said.
According to Kakar, Dunia saw very few ‘skips’ overall, with the peak in the first quarter of last year. During that period, the finance outfit cut back on its lending severely, the CEO added.
Loved this article I recall reading his interview when he was the Citi boss where he said about importance of Trust in a Bank and how parallel it is to an Airline - and as correctly said banks need to bring back the trust factor and if more and more CEO's communicate this the confidence positively can be cascaded What a difference of statements from HSBC boss which got published two days earlier and this Thanks to AB for featuring Rajeev
At last comments by a professional who is customer centric. Mr. Kakar sounds like a compassionate and good leader (unlike the statements of his HSBC counterpart). Quality flows from the top into the rest of the organisation and build character and culture. I'm sure Dunia as a company are doing good things and I have a positive perception of the brand (was unaware of this company before reading the article). Sound like the kind of financial institution that I will consider doing business with in future (I'll be on the lookout for good offers to switch my account from my current bank - HSBC!).
someone who does not want to throw people in jail!! and he wants them to come back and work to pay off their debt all i can say is WOW give this man the job as CEO for HSBC!!!!
I HAVE QUESTION ? WHERE IS THE INSURANCE ........ banks where giving loans , credit cards like coockies and they where charging insurance credit sheild ...
It is nice to hear a guy with some honest views on the whole banking and debt situation. The only mistruth is that he believes that he can collect all of the money owed from people that have skipped leaving credit debt. This is nonsense. A bank in the UAE just can't get the money from someone who is not there, no matter how hard they try or which international collection agency they use. Credit card debt is not an international crime and in almost every country outside of the GCC, credit card and small personal loan debt is unsecured and therefore the risk is all with the bank, not with the borrower. Banks will spend more chasing it than from any amount they manage to collect. Maybe in some countries they can employ bullies to hassle debtors, but is it worth it? simple answer is no. Banks need to adopt much stricter lending criteria and a credit bureau must be put in place. This is the only way forward.
I believe Mr. Kakar has got all mixed up. You must look at the subprime crisis and assess the extremely high risks banks were taking when handing out these loans to unqualified individuals. The crisis didn't start because people got laid off! People failed to come up with their payments because they were unqualified, (bank's fault for giving them loans) banks traded toxic assets over their value (banks fault), banks failed to provide enough provisions because they are paying their top execs too much (banks fault). So your analysis is a bit flawed and only looking at the current situation, not the root cause.
if rajeev cares so much about custmers then perhaps he should not be charging 41% interst rate!!! 41% intersrt!!!
It is well for CEOs to say that people were getting paid a lot and now the problem has been fixed. Who has looked what a CEO takes home? Who has corrected what his cronies take home? They still continue to take large pay packages and bonuses worth millions. At a time when their companies are bleeding - people at the top continue to take the lion's share of revenue. Central Bank must regulate the pay packages and bonuses paid to CEOs and their pets.
I ask, if kakar care soooo much off customers, then why his people call and scream me? Why charges sky high? Why at time of selling card they are nice and goodie goodie but tell all lies??? They send email with offer but what of offer of fairness? That is not on offer!!! Be careful everyone!!!!!!
Truth be told, people like Rajeev have killed this market by promising easy cash to everyone. These businesses showed people how eas it was to borrow and charged them an arm and a leg for it. It is convienient to now stand around and cliam that they are not the ones responsible. Be willing to take your share of blame too Rajeev. Cusmers cannot always be the ones to be blamed, shouldn't they must also be right ones in a while?