When I was a kid, my parents gave me a daily allowance of 20 pence after school. Most of the time, it quickly went on the latest sugary or chocolate snack from the local sweet shop.
But I remember one week, I decided I really, really wanted one of the shiny new Walkmans all my friends had. My mother gave me the option that I could forgo the sugary snacks, save up my 20 pence every day for a few weeks and buy the Walkman, or they would buy it for me that afternoon but my daily allowance would drop to 10 pence per day for a few months in order to pay off the cassette player.
I went for the second option, but I must admit, once the novelty of the Walkman wore off, I really missed those Cadbury’s chocolate bars. While my music taste improved slightly and my teeth were in better shape for a few weeks, it did teach me some important lessons: financial responsibility, managing my own money and realising that if you want to achieve a goal, it often involves some sacrifice along the way.
The above incident sprung to mind when I read the latest results from the Arab Youth Survey. While drugs, mental health and religion are the headline-grabbing buzzwords, I think the most shocking finding is the fact that one in three young Arabs surveyed believe the government has a duty to pay off the debts of all its citizens.
I am all for supporting those struggling with financial difficulties, but my initial reaction was that this shows a serious lack of financial responsibility among young people in the Arab world.
I put this question to Dr. Jihad Azour, Director of the International Monetary Fund’s Middle East and Central Asia Department.
It’s time Arab youth modernised their attitudes towards debt and realised that it’s not the government’s job to bail them out
“...the youth are asking for a net, for an economic and social safety net... they need it because their level of unemployment is high. When you have a level of unemployment that exceeds 30 percent, it means that you have an issue and this is where the Fund is becoming a priority... how can we create opportunities...”
My personal modus operandi has always been that if you take out a loan, it is your responsibility to pay it back and if you can’t afford the loan, or the car, holiday or whatever it is you want, then you shouldn’t get it: it’s either the sweets or the Walkman, but not both.
But this culture of governments waiving debts is already a reality. The Debts Settlement Fund (DSF), a UAE state-backed initiative, requires banks to waive half of debtors’ loans, while the other half is paid off by the fund. Last February, 13 national banks waived the debts of 3,310 Emirati citizens from loans totalling $98.28 million. A study by McKinsey & Company in 2011 showed that 70 percent of UAE nationals younger than 35 are in debt. However, a 2014 report by The National newspaper put the blame on the banking sector for tempting young workers into needless debt.
“The culture here in the UAE is that you start with debt from day one,” a financial consultant told the newspaper. “If you start work, then on your first day, banks will approach you because they now know you have earning power – especially if you work in the government. Then you are considered ‘a good potential loan taker’ so they tempt you and run behind you.
“I keep fighting with [my sons]and telling them to hold onto their money... but they don’t listen. They want new expensive cars. Their wives want to travel abroad to show off to their friends, so my sons take out loans so they can travel. I’m worried about them. Now they are all in debt and burdened by their loans,” he said.
But maybe the answer lies in education. In 2015, the Emirates Foundation and the Ministry of Education teamed up to teach young people financial literacy as part of a four-year plan, with topics such as budgeting and personal finances at the core of the curriculum.
“It’s not only about teaching math and science and art and literature it is also about, you know, building the skill set and the values that are needed for a better future,” Dr. Azour said. Arab youth may have moved on from Walkmans to iPods and music streaming, but maybe it’s time they also modernised their attitudes towards debt and realised that it’s not the government’s job to bail them out if they decide to splurge on overindulgences; now that really would be a sweet deal.
For all the latest business news from the UAE and Gulf countries, follow us on Twitter and Linkedin, like us on Facebook and subscribe to our YouTube page, which is updated daily.
Subscribe to Arabian Business' newsletter to receive the latest breaking news and business stories in Dubai,the UAE and the GCC straight to your inbox.