x Abu Dhabi, UAESaturday 22 July 2017

Responsible borrowing starts with smarter bank lending

With new Central Bank regulations to be introduced, the whole nation may have the opportunity to wipe the financial slate clean.

It was a pleasure to hear this week's Friday sermon, delivered in every mosque across Abu Dhabi, discussing the worries of personal debt, a hot topic for UAE nationals in recent years.

For years many young nationals just out of university have been targeted by aggressive bank agents offering large sums of cash with few strings. And many have fallen into this trap, signing large chunks of their monthly salaries over to the bank, sometimes for up to 30 years.

After realising the consequences of allowing banks to continue giving such easy credit, the Central Bank began to enforce new laws on borrowing. Yet, by the time bankers got around to doing this, the level of personal debt among nationals had already skyrocketed.

Taking action to address the growing concerns, the government reached out to citizens, calling for applications for financial assistance to cover personal debt including loans, mortgages and other various categories. Men and women travelled from far and wide across the UAE in hope of seeking financial assistance.

When I visited one of the locations where applications for relief were being processed, people waiting for their turn expressed hope, but interestingly enough, a fair amount of scepticism.

A few men sitting by me discussed the overwhelming number of applications and how they didn't expect a response from the government on their case for a few years to come. Another gentleman was willing to wait, saying that his monthly salary was Dh8,000, out of which Dh6,000 was deducted for loans. Any assistance would be welcomed, he said, as long as action was taken.

Hearing this conversation made me realise just how crucial financial assistance services are to some people.

Based on the improved customer service that we are seeing in many government entities, the processing units for debt relief are certainly receiving adequate training. Yet it is imperative that those behind the counters also understand the magnitude of their task.

For many UAE nationals, financial assistance could mean the difference between building a house or being forced to sell land; marriage or having to wait a few more years; freedom or imprisonment for failing to meet financial obligations to the banks.

Undoubtedly, it is easy for those of us looking in from the outside to insist on an efficient and timely process, while failing to comprehend the complexity of deciding whom to help, and whom to cast aside. Choosing to be part of this assistance process is a noble choice and should be commended, if the duty is fulfilled with the knowledge and recognition that people's livelihoods are at stake.

The success of efforts to assist citizens will require the cooperation and support of many. Much also depends on how strictly the new Central Bank regulations are enforced.

But as is to be expected, bank salespeople are already finding ways around the system. Some bank agents have even tried to get me to sign up for new credit cards, requesting less paperwork from applicants than was previously required before the Central Bank rules went into effect.

Some people are of the opinion that providing too much financial support will lead to further borrowing and spending. However, knowing that many here were victims of an imperfect system, it seems only fair to give people another chance.

As the regulations were amended and started anew, so should the financial journey of many UAE citizens. We have the opportunity to turn a new leaf through education and government social support. To wipe the slate clean, or at least assist those who are in dire need of support, will allow for a new chapter of wise spending to begin with financial management taught from a young age.

 

Taryam Al Subaihi is an Emirati social commentator specialising in corporate communications

On Twitter @TaryamAlSubaihi