Credit demand in the Emirates up as austerity measures ease

The price of Brent crude, the international benchmark, averaged US$52 in the three months ending in March, a 33 per cent increase from just under $40 a year earlier. Lucy Nicholson / Reuters

Demand for credit in the UAE inched ahead in the first quarter amid higher oil prices and easing austerity, according to a Central Bank survey.

The latest quarterly Credit Sentiment Survey showed modest demand for both business and personal loans, the first time the measure has been in positive territory in a year.

Business credit increased marginally at a net balance of more than 7.6 in the three months ending in March, from 1.3 in the previous quarter.

The scores represent the weighted percentage of respondents reporting an increase in demand for loans minus those reporting a fall in demand.

The price of Brent crude, the international benchmark, averaged US$52 in the three months ending in March, a 33 per cent increase from just under $40 a year earlier.

Survey respondents reported a tightening in credit standards over the period but slower than before.

Tighter lending among banks that are wary of impairments has encouraged some companies to look elsewhere for funds, such as peer-to-peer lenders (P2P).

The Dubai-based solar company Enerwhere earlier this year tapped P2P platform Beehive for a Dh1 million loan, which was funded within four days at a 15 per cent interest rate.

Daniel Zywietz, the chief executive of Enerwhere, said that his company had decided to go a different route than traditional lending after unfavourable terms from the banks.

“We’re rapidly growing, more than doubling revenue last year and that means we constantly need to build resources ahead of growth,” he said. “Banks aren’t providing that service to the type of company that we are which is young, fast-growing and without a local backer.”

Personal loans increased moderately by a net balance measure of more than 3, mostly coming from Dubai and the Northern Emirates. There was more demand for credit cards as well as personal and Islamic loans, with respondents looking for that to grow further in the next quarter.

However, the launch of the Al Etihad Credit Bureau at the end of 2014 has resulted in lower issuance rates as banks are better able to identify potential borrowers with poor credit histories.

Last month Mashreq said that credit card approvals fell 25 to 30 per cent between the fourth quarter of 2015 and the second quarter of last year.

The Central Bank survey showed that respondents expected further tightening.

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