Cash-strapped expatriates will be less inclined to flee their debts when a database holding the credit records of millions of bank customers becomes operational next year. Banks should find it easier to track indebted customers after a law was passed requiring local and international lenders in Dubai to share customer data with the credit bureau Emcredit. The legislation also opens the way to tracing customers across borders if agreements are made to link credit data in the UAE with countries such as the UK, India and Pakistan.
"If an individual with a bad credit record leaves the UAE, that history could follow him to his country of origin," said Zaid Kamhawi, the chief business officer of Emcredit. "The logic is that banks in future may be able to force the individual to go back and settle his debts." Thousands of expatriates left the UAE owing money to banks and other creditors during the global financial crisis after a wave of job losses and a collapse in the country's property market. Many banks were forced to write down the debt with little hope of recovering the cash.
Mr Kamhawi said the legislation could also benefit other expatriates leaving the UAE who could use the database to prove they had a good credit history. Officials hope the Dubai law will help provide the financial services industry with better credit information on retail customers and small businesses. Emcredit wants to create a database holding credit details of 80 per cent of the country's 3 million retail banking customers within a year. That compares with 30 per cent now.
It also hopes to obtain credit data on the country's small and medium-size businesses. "What has been proven in other countries is that self-discipline mechanisms are the strongest way to tackle defaults and reduce debts," sad Mr Kamhawi. "Individuals with poor credit history find it hard to rent out an apartment or obtain a post-paid telephone line, for example, as it affects all your credit rating decisions."
The law was more effective than other methods such as criminalising bounced cheques, he said. tarnold@thenational.ae
