UAE banks were less willing to extend loans to corporations and small businesses during the second quarter of the year compared with the first, according to the central bank’s quarterly credit sentiment survey.
Lenders were also hesitant about giving loans to individuals, but at the same time demand for loans eased across the board amid a slowdown in economic growth.
That trend is expected to continue after a recovery in the first quarter and comes despite a rebound in oil prices this year, the central bank said.
“The ongoing tightening of credit conditions for corporate and small businesses is likely due to the reduced willingness to extend business loans among financial institutions, reflecting a reversion of conditions towards a slower growth path,” the central bank said yesterday.
The bank’s net balance measure in aggregate for business loans was +3.1 in the quarter that ended June compared with +13.6 in the quarter that ended in March. Any reading above zero indicates growth.
Much of the decline came from Dubai, where banks were least willing to lend to small- and medium-sized businesses. The woes facing small business owners began to appear in earnest last year as the price of oil took a nosedive, losing more than 70 per cent of its value from its peak in mid-2014.
Abdulaziz Al Ghurair, the chairman of the UAE Banks Federation and chief executive of the Dubai-based lender Mashreq, warned in November that a number of small business owners may have skipped town, leaving about Dh5 billion worth of unsettled loans.
In May, however, he said that some of the impact of that fallout had been contained. Still, that has not meant that SMEs are finding it that much easier to tap debt.
According to the results of a survey released in May by the Dubai-based Gulf Finance, SMEs continued to feel the pinch in the first quarter as the economy slowed, with payment collection and securing finance remaining difficult.
mkassem@thenational.ae
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