UAE credit demand slowed in Q3, says central bank

Banks show reduced willingness to lend to SMEs, expats as economic growth slows
UAE credit demand slowed in Q3, says central bank
By Sarah Townsend
Thu 20 Oct 2016 01:50 PM

Demand for business and personal loans in the UAE softened in the third quarter of 2016 reflecting tightening credit conditions, according to the central bank’s latest quarterly sentiment survey.

Results from the September quarter survey revealed a downward trend in overall credit appetite for both business and personal loans.

It suggests reduced willingness by UAE banks to lend while economic growth and activity remains slow, the survey said, adding that this was evident in survey respondents reporting tightening credit standards pertaining to terms and conditions.

By loan type, the softening in business credit demand was most evident in small-to-medium-enterprises (SMEs) and non-resident bank customers, suggesting a higher degree of risk aversion among banks towards extending loans to expats and SMEs.

The net balance measure was -2.3 for the September quarter, down from 3.1 recorded in the previous quarter. The central bank said that 34.6 percent of respondents reported a decrease in demand, 32.9 percent reported an increase in demand, while 31.5 percent reported no change.

Within the personal loans category, the softening in demand was most notable with regard ‘car loans’ and ‘non-housing investment’, the survey said, while demand for credit cards increased slightly, it added.

Demand was reported with a negative net balance measure of -10.5, a further drop from the net balance measure of -1.8 in the June quarter, and the lowest reading since the credit sentiment survey launched in the first quarter of 2014.

However, almost 80 percent of survey respondents reported “no change” in credit standards across all the categories, and they were modestly optimistic with regard credit availability in the coming quarter.

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