Stronger loan demand to fuel credit growth

Personal loan recovery seen in fourth quarter as credit standards ease and fees, charges tighten

Credit growth in the UAE is set to pick up in the fourth quarter on the back of improved business and personal loan demand, the latest credit sentiment survey from the Central Bank of the UAE said.

The survey forecast a recovery in demand for personal loans as aggregate credit standards ease further, with the outlook for interest rates as well as financial and housing markets seen as key factors driving the comeback.

The bullish sentiment comes on the back of third-quarter data that showed growth in demand for business loans even as personal loans drew back into negative territory after a solid second quarter.

The central bank’s credit sentiment survey is a quarterly publication which collects information from senior credit officers from all banks and financial institutions extending credit in the UAE. The information collected constitutes qualitative responses to a series of questions relating to credit conditions in the most recent quarter and expectations for the upcoming quarter.

Third-quarter data on corporates and small businesses revealed an increase in demand for business loans across the board. By loan type, the increase was most significant among large firms and local firms.

In terms of credit standards, the survey results showed a tightening during the third quarter, while in terms of outlook, respondents anticipated a further tightening in credit standards and across all terms and conditions.

By emirate, survey respondents reported an increase in demand across the board, most significantly in Dubai and Abu Dhabi.

With respect to expectations for the next quarter, survey respondents expect the demand for business loans to increase further among all categories — especially for large firms, small and medium-sized enterprises (SMEs) and other local firms.