Al Etihad Credit Bureau to allow creditworthiness checks of UAE borrowers

Al Etihad Credit Bureau’s data building will help the UAE’s finacial services industry create an accurate picture of a potential borrower’s indebtedness. Silvia Razgova / The National

Al Etihad Credit Bureau is operationally ready to launch after more than a dozen banks sent it credit data about their retail customers.

It means the bureau will soon be in a position to share information across the financial services industry on the creditworthiness of potential borrowers.

“Al Etihad Credit Bureau has completed all necessary preparations and is ready to go live with the new system and begin operations soon after the by-laws are made public in the Official Gazette,” Marwan Lutfi, the chief executive of Al Etihad Credit Bureau, said yesterday.

“This will support the bureau in its role to provide reliable and thorough credit reports that add significant value to the way risk is assessed in the UAE financial industry.”

Since January, 25 banks and other lending institutions – which control about 96 per cent of the retail credit market – had supplied the bureau with credit information about their customers. The information covers the payment behaviour of their customers for the past 24 months including any defaults. Mr Lutfi said the data crossed the bureau’s “credit data accuracy threshold” and “exceeded international data quality standards”.

It will enable the bureau to share the information with other banks to help them build an accurate picture of a potential borrower’s indebtedness, allowing them to calculate his or her ability to honour the debt. At the moment, banks have no way of checking the credit history of customers relating to other lenders.

A federal law was passed in 2010 to establish the bureau under the responsibility of the Ministry of Finance. The impetus behind its creation was a desire to cut the risk of a credit crunch similar to 2009, when a wave of defaults on loans caused banks to scale back on lending. Officials hope it will ease the flow of credit to customers with a favourable financial track record while stopping those with a poor credit history from amassing more debt. At the same time, banks should have to put aside fewer provisions to guard against defaults.

Al Etihad Credit Bureau had targeted a start date of the first quarter to become operational. In recent months it has completed the final steps of its pre-operational phase, including a security audit of the system to ensure the efficient roll-out of the bureau’s services, it said. It also signed agreements with all UAE financial institutions, requiring them to submit credit data to the bureau.

The bureau will start work at a time when credit growth is steadily rising to its highest since the global financial crisis of 2008. Emirates NBD has forecast private sector credit growth to accelerate to 8 per cent this year, up from 7.1 per cent at the end of last year.

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