New UAE residents can use financial history from home for faster credit

New UAE residents can now use their home country credit histories to speed up the process when applying for financial services under a new partnership between Al Etihad Credit Bureau (AECB) and US-based cross-border credit bureau Nova Credit.

The “credit passport” agreement, the first in the GCC region, gives the country’s local and international financial institutions and banks real-time access to the translated home credit histories of new residents who have not had enough time to build a credit score in the UAE.

“AECB is proud to be among the region’s first federal entities to provide cross-border credit solutions, creating value for lenders, individuals, businesses, government entities and the public through key collaborations with international bureaus,” Marwan Lutfi, chief executive of the credit bureau, said on Tuesday.

“As we continue to introduce cutting-edge products to our customers, we reiterate our commitment to creating a positive social impact, in line with the UAE’s vision of becoming the epicentre of a borderless global economy.”

Set up in November 2014, AECB brings transparency to the lending industry by assembling a credit record of the UAE’s financially active residents.

It collects data such as loan, mortgage, credit card and phone bill payments.

A person’s credit report documents their entire credit history in the UAE, showing the credit cards, loans or other finance products they have signed up for, along with their payment behaviour.

This also means that any bounced cheques and payment defaults will be reflected in a person’s credit history.

A UAE resident's report is generated only when they have a credit card, loan, mortgage or a phone bill. The AECB collects data from banks, finance companies and telecom companies.

A credit score for individuals is a three-digit number between 300 and 900 that represents a borrower’s creditworthiness and how likely they are to make credit card or loan payments on time.

A low score indicates they are a higher risk for a lender while a higher score indicates a lower risk.

The credit passport is now available for AECB subscribers to support credit applications from new residents with a financial history in countries such as India, the Philippines and the UK, the credit bureau said.

Other countries will be added in the near future, it said.

Nova Credit also serves people coming from Australia, Brazil, Canada, the Dominican Republic, Kenya, Mexico, Nigeria, South Korea, Spain and Switzerland, according to its website.

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“Today’s consumers deserve the ability to take ownership of their financial data and not be locked out of accessing basic services due to the siloed characteristic of our global credit reporting system,” said Collin Galster, vice president of international at Nova Credit.

“We are looking forward to taking this next step with AECB and expanding the global footprint of credit passport, so consumers around the world can experience borderless credit reporting.”

Lenders and financial institutions in the UAE welcomed the move, saying it would help new UAE residents to meet their financial needs within minutes rather than months as they build a local credit score.

“There will be more visibility on the new-to-country applicants’ credit health based on their home country credit portfolio, which will allow them to have any lending product rather than waiting for two to three months,” said Iftekhar Salim, chief executive of Appro, a FinTech app that simplifies credit applications for customers.

There are about nine million residents in the UAE, representing 200 nationalities, according to government data.

There will be more visibility on the new-to-country applicants’ credit health based on their home country credit portfolio

Iftekhar Salim,
chief executive of Appro

Last September, the UAE was ranked first across the Middle East, Africa and Asia, and was among the top 10 countries around the world for residents to relocate to, a survey by health insurance company Cigna found.

Four per cent of expatriates around the world want to relocate to the UAE because of its progressive policy changes, recent visa reforms and economic rebound after Covid-19, Cigna said.

“AECB understands the importance of providing transparent and seamless access to customers’ data and offering a comprehensive view of their credit worthiness across borders,” said Farhan Mahmood, group chief risk officer of RAKBank.

“This is especially critical in the UAE market, where many expatriates seek to take advantage of their home market credit history. With advanced scorecard models, we aim to enhance our performance and offer seamless access to credit and banking services for all customers entering the UAE.”

Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.

Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.

“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.

Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.

“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.

Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.

From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.

Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.

BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.

Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.

Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.

“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.

Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.

“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.

“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”

The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”

Gender pay parity on track in the UAE

The UAE has a good record on gender pay parity, according to Mercer's Total Remuneration Study.

"In some of the lower levels of jobs women tend to be paid more than men, primarily because men are employed in blue collar jobs and women tend to be employed in white collar jobs which pay better," said Ted Raffoul, career products leader, Mena at Mercer. "I am yet to see a company in the UAE – particularly when you are looking at a blue chip multinationals or some of the bigger local companies – that actively discriminates when it comes to gender on pay."

Mr Raffoul said most gender issues are actually due to the cultural class, as the population is dominated by Asian and Arab cultures where men are generally expected to work and earn whereas women are meant to start a family.

"For that reason, we see a different gender gap. There are less women in senior roles because women tend to focus less on this but that’s not due to any companies having a policy penalising women for any reasons – it’s a cultural thing," he said.

As a result, Mr Raffoul said many companies in the UAE are coming up with benefit package programmes to help working mothers and the career development of women in general.

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New UAE residents can use financial history from home for faster credit

Partnership between AECB and Nova Credit gives banks and financial institutions access to a person's home credit score

UAE salary guide 2023 — in pictures

Gender pay parity on track in the UAE

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