More than $1bn in ‘skips’ hit UAE banks

Kuwait Times - - FRONT PAGE -

DUBAI: Banks in the United Arab Emi­rates are work­ing to­gether to try to stem the num­ber of small busi­ness own­ers flee­ing the coun­try with un­paid debt, a trend that has al­ready reached around 5 bil­lion dirhams ($1.4 bln) this year, a se­nior bank­ing of­fi­cial said. Small and medium-sized en­ter­prises (SMEs) have come un­der pres­sure in re­cent months amid a grad­ual dry­ing up of liq­uid­ity in the bank­ing sys­tem due to the weak oil price and slow­ing eco­nomic growth.

As a re­sult, some busi­ness peo­ple have cho­sen to “skip” the coun­try, leav­ing be­hind un­paid debt, a sit­u­a­tion that bankers say has grown sig­nif­i­cantly from last year, al­though they did not pro­vide pre­cise fig­ures. In a coun­try where un­der ex­ist­ing leg­is­la­tion, a bounced cheque risks land­ing the is­suer in jail, many of those ab­scond­ing fear the con­se­quences if they stay.

“We want to take co­or­di­nated ac­tion on risk man­age­ment,” UAE Banks Fed­er­a­tion chair­man Ab­dul Aziz Al-Ghu­rair told re­porters on the side­lines of a bank­ing con­fer­ence yes­ter­day. “The idea is to al­low the cus­tomer to pay for his debt and stay in town if they have a good in­ten­tion. If they don’t have a good in­ten­tion, then it is no good (the bank) spend­ing time (with them), it doesn’t help.”

In re­cent years, the UAE gov­ern­ment has been keen to en­cour­age banks to lend to SMEs, which ac­count for around 60 per­cent of the coun­try’s gross do­mes­tic prod­uct. But third-quar­ter earn­ings from some of the smaller lenders pointed to prob­lems in th­ese loans. UAE cen­tral bank gov­er­nor Mubarak Rashid Al-Man­souri, at the same con­fer­ence ear­lier yes­ter­day, said the gov­ern­ment was keen to press ahead with a new bank­ruptcy law to help sup­port SMEs.

Cur­rent bank­ruptcy rules are con­sid­ered by lawyers to be out­dated and largely untested, with few strug­gling com­pa­nies us­ing the leg­is­la­tion. The cab­i­net ap­proved a draft law in July but it still needs the sup­port of the Fed­eral Na­tional Coun­cil, the coun­try’s leg­isla­tive body, and the pres­i­dent. Man­souri also said the UAE would set up a credit guar­an­tee scheme to help re­duce the risk of de­fault for po­ten­tial lenders. He didn’t elab­o­rate on the spe­cific de­tails of the plan. — Reuters

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