Mahmoud Kassem: Lend a little and be good to the UAE economy


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Neither a borrower nor a lender be, goes the line from Hamlet, but there are exceptions such as when interest rates are at historical lows and everything is on sale, from houses to household appliances.

That is when, despite best advice of Polonius, it is tempting to visit the bank and seek out a personal loan, as I recently did.

The bank, however, completely ignored my advances and has not been in touch again about my request, not even with an explanation.

Maybe this is good for me and I am not that upset but the bigger problem is for the economy: when times are good, oil prices are high and banks are flush with cash from big government deposits, lenders stumble over each other to lend to individuals, often overextending themselves with the risks they take.

The reverse is unfortunately true when times are tough, oil prices low and the banks don’t have much liquidity at hand: no one is that really keen to lend and everyone becomes risk averse, seeking the safest kind of lending to the most creditworthy companies and institutions.

It’s true that the nascent credit bureau has had some impact on the appetite of banks to lend to individuals now that they are able to see what everyone else has really borrowed at other banks.

But there are I imagine many people like me who have been employed at the same place for several years, don’t do business with more than one bank, don’t have any credit card debt and have perfect scores on their credit bureau test.

Yet still they can’t get a bank to lend them relatively small amounts of money that would taken as a whole give a boost to the local economy.

If this caution was just limited to individuals, it might not be so worrying. But there is plenty of evidence that banks also are also much more cautious when it comes to small businesses, and larger corporations. Every quarter the central bank publishes credit sentiment reports and with each passing quarter the bankers that are surveyed report that they are becoming more hesitant when it comes to lending.

The central bank said in its latest survey in July that UAE banks were less willing to extend loans to corporations and small businesses during the second quarter of the year compared with the first. And this isn’t helped by the fact that many small businesses, corporations and individuals are also extremely cautious taking out debt, it said.

Peter England, the chief executive of RAKBank, the biggest lender to small and medium sized enterprises in the UAE, confirmed this trend two weeks ago when he said that his bank’s loan growth this year will fall sharply to low single digits from the 10 per cent gain last year as not just small businesses but individuals shy away from tapping debt until the outlook for the economy becomes clearer. He did say however that his bank would be trying to boost its share of the mortgage market.

The most productive kind of loan for individuals is a mortgage as it allows individuals to build up equity in homes at a competitive interest rate while giving banks some piece of mind and steady income from a loan less likely to go sour. It is also much less of a headache for banks as the loan is secured by what is typically a stable asset.

Unfortunately, though, because of the downturn in the UAE economy, many people don’t have enough cash for a down payment. In a survey released last week by the property brokerage company Core Savills in Dubai, more than seven in 10 people polled said mortgage caps should be relaxed as it was hindering them from buying homes.

The Central Bank of the UAE introduced a mortgage cap in late 2013, which restricted the loan-to-value ratio for mortgages at 75 per cent for expatriates and 80 per cent for Emiratis for properties costing less than Dh5 million.

Savvy business people know, however, that the best time to invest is when there is most uncertainty. The same is true for individuals and it is a mistake for banks to become overly circumspect when deciding whether or not to give loans.

It may not be quite the Shakespearean tragedy but banks that refuse to “lenders be”, is bad news for the wider economy.

mkassem@thenational.ae

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UAE currency: the story behind the money in your pockets

Arabian Gulf League fixtures:

Friday:

  • Emirates v Hatta, 5.15pm
  • Al Wahda v Al Dhafra, 5.25pm
  • Al Ain v Shabab Al Ahli Dubai, 8.15pm

Saturday:

  • Dibba v Ajman, 5.15pm
  • Sharjah v Al Wasl, 5.20pm
  • Al Jazira v Al Nasr, 8.15pm
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Why does a queen bee feast only on royal jelly?

Some facts about bees:

The queen bee eats only royal jelly, an extraordinary food created by worker bees so she lives much longer

The life cycle of a worker bee is from 40-60 days

A queen bee lives for 3-5 years

This allows her to lay millions of eggs and allows the continuity of the bee colony

About 20,000 honey bees and one queen populate each hive

Honey is packed with vital vitamins, minerals, enzymes, water and anti-oxidants.

Apart from honey, five other products are royal jelly, the special food bees feed their queen 

Pollen is their protein source, a super food that is nutritious, rich in amino acids

Beewax is used to construct the combs. Due to its anti-fungal, anti-bacterial elements, it is used in skin treatments

Propolis, a resin-like material produced by bees is used to make hives. It has natural antibiotic qualities so works to sterilize hive,  protects from disease, keeps their home free from germs. Also used to treat sores, infection, warts

Bee venom is used by bees to protect themselves. Has anti-inflammatory properties, sometimes used to relieve conditions such as rheumatoid arthritis, nerve and muscle pain

Honey, royal jelly, pollen have health enhancing qualities

The other three products are used for therapeutic purposes

Is beekeeping dangerous?

As long as you deal with bees gently, you will be safe, says Mohammed Al Najeh, who has worked with bees since he was a boy.

“The biggest mistake people make is they panic when they see a bee. They are small but smart creatures. If you move your hand quickly to hit the bees, this is an aggressive action and bees will defend themselves. They can sense the adrenalin in our body. But if we are calm, they are move away.”

 

 

Getting there
Flydubai flies direct from Dubai to Tbilisi from Dh1,025 return including taxes

UK-EU trade at a glance

EU fishing vessels guaranteed access to UK waters for 12 years

Co-operation on security initiatives and procurement of defence products

Youth experience scheme to work, study or volunteer in UK and EU countries

Smoother border management with use of e-gates

Cutting red tape on import and export of food

Brief scoreline:

Wales 1

James 5'

Slovakia 0

Man of the Match: Dan James (Wales)

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UAE currency: the story behind the money in your pockets

THE BIO

Favourite holiday destination: Whenever I have any free time I always go back to see my family in Caltra, Galway, it’s the only place I can properly relax.

Favourite film: The Way, starring Martin Sheen. It’s about the Camino de Santiago walk from France to Spain.

Personal motto: If something’s meant for you it won’t pass you by.

UAE v Gibraltar

What: International friendly

When: 7pm kick off

Where: Rugby Park, Dubai Sports City

Admission: Free

Online: The match will be broadcast live on Dubai Exiles’ Facebook page

UAE squad: Lucas Waddington (Dubai Exiles), Gio Fourie (Exiles), Craig Nutt (Abu Dhabi Harlequins), Phil Brady (Harlequins), Daniel Perry (Dubai Hurricanes), Esekaia Dranibota (Harlequins), Matt Mills (Exiles), Jaen Botes (Exiles), Kristian Stinson (Exiles), Murray Reason (Abu Dhabi Saracens), Dave Knight (Hurricanes), Ross Samson (Jebel Ali Dragons), DuRandt Gerber (Exiles), Saki Naisau (Dragons), Andrew Powell (Hurricanes), Emosi Vacanau (Harlequins), Niko Volavola (Dragons), Matt Richards (Dragons), Luke Stevenson (Harlequins), Josh Ives (Dubai Sports City Eagles), Sean Stevens (Saracens), Thinus Steyn (Exiles)

ELIO

Starring: Yonas Kibreab, Zoe Saldana, Brad Garrett

Directors: Madeline Sharafian, Domee Shi, Adrian Molina

Rating: 4/5

How to protect yourself when air quality drops

Install an air filter in your home.

Close your windows and turn on the AC.

Shower or bath after being outside.

Wear a face mask.

Stay indoors when conditions are particularly poor.

If driving, turn your engine off when stationary.