Business owners have rallied behind the Central Bank's call for banks to lower rates charged on corporate loans, hoping for reduced borrowing costs in line with those available internationally.
The positive response from industry marks a contrast with an outcry from consumers over Central Bank moves to curtail lending to individuals, which came into effect at the beginning of this month.
Saeed al Mansouri, the chief executive and general manager of Burkan Munitions Systems, a local arms manufacturer, said he supported the Central Bank's move.
"It's a good sign of the Government's commitment towards supporting industry here," he said.
Banks in the UAE had been charging higher lending rates than those available internationally for some time, said Nizar Rajoub, the chief executive of the Emirates National Factory for Plastic Industries.
The company recently completed a Dh250 million (US$68m) syndicated Islamic financing facility, led by Abu Dhabi Islamic Bank, on which it pays a profit rate of between 6 and 6.5 per cent.
"There are companies getting financing from banks outside the region, and they're offering them 3.5 per cent," he said.
About a quarter of the financing facility was priced in US dollars, allowing for a rate of funding that was cheaper than one completely priced in dirhams.
On Sunday, Sultan al Suwaidi, the Governor of the Central Bank, called for banks to lower borrowing costs to businesses to better reflect levels of liquidity in the banking system.
Bankers said they welcomed the move.
Any drop of rates "will facilitate provision of credit into the market", said Nick Levitt, the head of commercial banking for the UAE at HSBC Middle East.
The industry should move towards greater transparency on borrowing costs by setting "commonly agreed best lending rates for the economy", he added. The rate banks lend to each other has fallen as an increase in bank deposits earlier this year sent extra liquidity flowing into the banking system.
Six-month Emirates interbank offered rates, known as Eibor, have fallen to 2.035 per cent, their lowest levels since June 2008. However, not all banks use Eibor as a benchmark.
A large gap has existed for some time between Eibor and the equivalent US dollar London interbank offered rate, or Libor, that in theory should be smaller because of the dirham's peg to the dollar. Many analysts predict this rate will fall during the year.
Local borrowing costs remained high as a result of the Emirates' property slide, said Bashar al Natoor, a corporate analyst at Fitch Ratings, a credit ratings agency.
"What hit most hard in terms of liquidity was the property sector in the UAE," he said.
"The access to funds and liquidity to corporates has been challenging, compared to other GCC countries."
