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Tue 20 Sep 2016 11:33 AM

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UAE's rescue plan for SMEs set to see $1.9bn loans restructured

UAE Banks Federation also says it welcomes plan to introduce bankruptcy law to help small and medium sized firms

UAE's rescue plan for SMEs set to see $1.9bn loans restructured
Abdulaziz Al Ghurair, chairman of the UAE Banks Federation.

A rescue plan for SME financing in the UAE has so far led to the restructuring or talks on restructuring loans worth AED7 billion ($1.9bn), according to the UAE Banks Federation.

Under the modus operandi" initiative launched earlier this year, banks are working to help more than 1,700 SMEs and corporates in the country, the organisation said in a statement which also praised the UAE's move to establish a bankrupcy law, highlighting the benefits it will bring to bosses of small and medium-sized businesses (SMEs).

The CEO Advisory Council of the UAE Banks Federation, the body representing 49 banks in the UAE, welcomed the progress made in bringing the bankruptcy law into force, and recognised the mutual benefit it will bring both to banks and owners of businesses.

Last month, it was reported that the UAE may finalise a long-pending bankruptcy law by the end of this year.

The UAE does not have modern bankruptcy regulations, making it difficult for companies to restructure or wind themselves up. Under existing legislation, unpaid debt or the issue of a bounced cheque can lend businessmen in jail.

At its third meeting of the year, chaired by Abdulaziz Al Ghurair, members said the new legislation will supports its "modus operandi" initiative launched earlier this year.

The initiative aims to work with lenders to SMEs experiencing repayment difficulties to agree to a process to enable the companies to reschedule their debt and continue business as usual.

Members of the Council acknowledged the significance of the SME sector to the UAE economy and noted the important role that bankruptcy law are playing in other dynamic economies around the world. 

They also said that the existence of a bankruptcy law is a critical factor in both stimulating new entrants to the SME sector, as well as inward investment from overseas.

Al Ghurair said: "We commend and welcome the legislation of the bankruptcy law, which the government has recognised as a pre-requisite to the country's future economic development, and as an essential tool to maintain the well-being of the business and environment economy.

"All banks were involved and responsible to consider every option to support their clients, and help them stay in business and succeed, especially SMEs which represent over 90 percent of the country's non-government GDP."

He added that under its SME rescue plan, banks have restructured or started talks to restructure loans worth AED7 billion for more than 1,700 SMEs and corporates.

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Pankaj Shah 3 years ago

A welcome step indeed. But why has nothing been done for defaulters of personal loans or credit card payments ?

Thousands are caught in debt traps due to the aggressive "pushing" of credit cards by banks through their outsourcing agencies. Cards are given without any vetting of ability to repay. One of my staff got six cards totalling AED 90,000 in credit when his annual salary was only AED 60,000/- . Banks refuse to accept any Moral responsibility of putting people in the debt trap, pushing the blame on the agencies. Can Mr. Aziz Al Ghurair & the Banks association address this issue now and BAN all outsourcing of such services ?

What about undated security cheques for the full amount on all loans ? This is a terrible practice often misused by banks. A close friend went to jail because his Islamic Bank unjustifiably cashed his security cheque. My bank is refusing to return my car loan security cheque even after the loan was fully paid up! Can't the authorities do something ??

Mahmud Ayaz Qureshi 3 years ago

The new law is very supporting to business people. I want that this new law should implement without any further delay. A company started his business in 1999, banks earn very good revenue, suddenly his facility was dropped 50% and put that company in problem which resulted that company could not meet his commitment with their supplier and suffer loss due to bank wrong decision. Thank you .