By Shane McGinley
The UAE currently has one of the highest consumer debt-to-income ratios in the world
A Dubai bank is offering free holidays and a delayed repayment plan in a bid to entice customers to borrow more money, just weeks after it was revealed the UAE has one of the highest consumer debt-to-income ratios in the world.
The Commercial Bank of Dubai (CBD) has launched the promotion for its personal loan customers, offering them free travel to destinations of their choice and a chance to start repayment next year.
The offer, which is in cooperation with Dnata, the Emirates Group's airline services arm, is being offered to new customers or to existing borrowers as a top-up on ongoing loans.
The move comes at a time when a business academic said the UAE’s consumer debt-to-income ratio is higher than in most European countries and the US.
London Business School professor of finance Francisco Gomes, who lectures in the school’s Dubai-based MBA programme, also said regulators needed to set clear rules for lending institutions.
Research released by Strategic Analysis last month showed consumer debt in the UAE had reached $95,000 per household, or $114bn in total.
It followed a study by local price comparison website Compareit4me.com, which found more than a third of UAE respondents to a new survey had more than three credit cards, while half had nearly maxed out their limits and 42 percent did not pay more than the minimum repayment each month.
Professor Gomes said the $95,000 debt level compared to an average household income of around $45,000-50,000.
“This implies an average ratio of household debt to income of almost 200 percent,” he told Arabian Business.
By comparison, he said, the average ratio in the Euro area and the US was close to 100 percent.
“In the UK the number is higher, but still just under 140 percent,” the London-based academic added.
Professor Gomes said it was important consumers were financially literate, and he advocated personal finance to be taught in schools.
What were the IMF warning about a new property bubble, remember when that bubble burst it was preceded, triggered and accompanied by a credit bubble, which became a 'credit crunch'.
Few lessons learned I see, once more easy money becomes the scourge of the economy, sadly if it works as a sales tactic it will set another bad example and then the competition starts.