By Stanley Carvalho
Banks in UAE grappling for funds as liquidity dries up since the 2008 financial downturn.
Local banks in the UAE are tapping the Arab Trade Financing Programme (ATFP) for loans due to lower costs, the programme's chief said on Tuesday.
The ATFP has loaned $640 million to banks in the UAE, a large part made in the last two to three years, Jassim Al Mannai, chief executive of ATFP said.
The ATFP, set up in 1989 as a subsidiary of the Arab Monetary Fund (AMF), finances foreign trade of Arab countries.
Without elaborating to reporters, Mannai said: "Our cost is much lower than others. We lend at Libor (London interbank offered rate) with a small spread to cover administrative expenses, but overall our costs are lower than the market rate."
Banks in the UAE have been grappling for funds as liquidity dried up due to the financial downturn since 2008.
He said: "Liquidity in the last few years has been lower than before because of the crisis. But each bank's situation is different for coming to the ATFP," he also added that the last year was the most active when banks sought loans from ATFP.
Abu Dhabi based Union National Bank secured a $40 million line of credit from the ATFP on Tuesday, taking the bank's total borrowing from the ATFP to $290 million.
Mohamed Nasr Abdeen, CEO of UNB, said: "It is not only financial support but a sort of message for the bank to increase trade activities for Arab countries."
Without giving figures, he said: "The bank will see a reasonable increase in financing in 2010 despite its conservative approach and the economic position."
Asked about fourth quarter 2009 results, he said: "overall, our results are encouraging. There will be reasonable growth." (Reuters)