UAE Credit Bureau to Open the Door on Lending for SMEs

01 Apr 2015
  • UAE Credit Bureau to Open the Door on Lending for SMEs

The UAE credit bureau will offer company reports for the first time in a move that could eventually help small businesses tap lending more easily.

Al Etihad Credit Bureau, which started to offer individual credit reports last year, will now provide up-to-date information on the 65,000 businesses in the country that have borrowed money.


The bureau said the commercial credit reports will provide details of company ownership, the credit facilities that are being used, the total amount that they have borrowed and the company’s addresses.


“As the UAE’s financial sector matures and increasingly positions itself as a competitor on the global financial stage, it is essential for the country’s banks, lenders and utility providers to have as much information at their fingertips as possible when making important credit decisions – especially as the amount of credit in question can be substantial,” said Marwan Ahmad Lutfi, the chief executive of Al Etihad Credit Bureau.


The new service will allow banks to regulate their risks better when lending. It could also reward companies with good credit scores, especially small and medium-sized enterprises (SMEs), with better interest rates when they seek fresh lending from banks.


“One of the biggest challenges faced by banks in financing SMEs is related to accurately assessing their creditworthiness and their ability to pay back loans,” said Vince Cook, the chief executive of National Bank of Fujairah. “By setting up a mechanism that provides information on a business in this area, the new commercial bureau will go a long way in helping banks mitigate risks and provide higher levels of funding at competitive rates to SMEs that have a proven track record.”


This comes at a time when the government is relying on SMEs to ramp up GDP growth amid a weak oil price.


SME executives reacted to the announcement positively.


Even though small businesses represent almost 92 per cent of the total number of companies here and provide more than 86 per cent of jobs in the private sector, they account for only about 4 per cent of total lending.


“Any initiative that helps promote transparency should be welcomed,” said Dany El Eid, a Lebanese entrepreneur who has a Dubai-based digital technology business called Pixelbug.


“It will definitely make sure that the companies that are creditworthy get quicker loans while weeding out the ones that are detrimental to this process.”


Mr El Eid said that he found bank loans came with too high an interest rate, so when he recently sought to borrow Dh200,000, he did so with a so-called peer-to-peer lender, an online company which matches small businesses seeking loans with investors.


Banks, which have attracted criticism in the UAE for not doing more to support SMEs, say the new commercial service would make it easier for businesses to borrow.


“It is a long-awaited and important milestone for banks to assess creditworthiness of businesses across the country, and brings the UAE to the highest standards practiced by developed countries worldwide,” said Chaker Zeraiki, the head of business banking at HSBC UAE. “Having a centralised gateway for information will not only further enable banks to assess risk, but also accelerate the pace at which they extend lending to businesses.”


By Mahmoud Kassem | Published in The National | March 25, 2015

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