As business slowed before grinding to a halt at the end of March, Payal Mirchandani, the chief executive of Pinca Trading, watched as orders and payments dried up from the large retailers that buy from her.
She slashed the annual sales forecast for her business, which distributes toys and other children's products, while fielding emails and calls from retailers that wanted to extend payment terms, from 60 to 100 days. Then she turned to her banks for relief.
Mashreq Bank, where she has a secured business loan, offered her a three-month payment holiday – a process she describes as quick and “pretty seamless”. Interest will still accrue during this period, but will be charged on the final payments. “Of course it would be great if they didn’t charge the interest at all, but I think it’s fair, and it’s still a support,” says Ms Mirchandani, from Canada who lives in Dubai.
RAKBank, where she has a trade financing facility was more thorough in their checks to approve a payment holiday. “They did their due diligence – they asked us a lot of questions, they wanted us to submit a lot documents. But they were supportive at the end, given that we could prove we had been affected," she says.
“Because we are a distributor selling to retailers, it’s a no-brainer – retailers were shut across the country.”
Ms Mirchandani says she breathed a sigh of relief when her banks said yes. “Payment collections are very difficult right now, and I don’t know if I would have been able to manage my cash flow if I didn’t get the support to be honest, I’m just grateful that I got it at the time that I did," she adds.
Borrowers across the country have benefited from loan relief from their banks, driven by the UAE Central Bank's Dh50 billion Targeted Economic Support Scheme (Tess), part of a Dh100bn package launched on March 14. The overall size of the stimulus was later increased to Dh256bn and by April 23, banks had allocated over 60 per cent of the Dh50bn Tess package, which equates to Dh30bn.
For some residents, the process of applying for debt relief has been very smooth. Omar Youssef works for Orora, an events company in Dubai, which has seen most of its business dry up during Covid-19 apart from its animation studio and work on digital campaigns.
He called HSBC where he has a personal loan and is a priority banking customer and asked for a payment holiday. Due to his 33 per cent salary reduction, the bank offered him a loan holiday of up to three months, without interest or fees, though he has to sign a document each month requesting the payment holiday for an additional month and attesting his income remains reduced.
“It was a very easy procedure," he says. "They send you an online form to complete and sign, and attach the company letter saying you have a salary reduction."
Dan Robinson, head of wealth and personal banking at HSBC UAE, said: "Our customers have told us where they need our support most and we have made those areas our focus."
Mr Youssef says some of his friends, who have had their incomes affected by Covid-19, did not apply for loan holidays because they thought it would be drawn-out process. “When I saw how easy it was I called my friend and told him he should do it as well," he says.
Most financial relief measures are broadly similar across banks in the country, says Ambareen Musa, founder and chief executive of the financial comparison website Souqalmal.com. Borrowers who have been financially affected by the pandemic and the resulting movement restrictions have access to penalty-free payment holidays on loans for up to three months, and interest-free instalment plans of up to six months on grocery purchases, school fee payments and utility bill payments made with credit cards, she says.
“Foreign banks have also introduced various financial relief measures, though these vary in structure and scale across individual banks,” Ms Musa adds.
Mortgage payments are often the biggest single cost faced by home owners and therefore relief from these can ease a significant financial burden.
Natasha Hatherall-Shawe, who owns a marketing, PR and events agency in Dubai, says “overnight” the business lost around 70 per cent of its revenue, as well as facing a slowdown in client payments.
“It leaves our company cash flow in a very difficult place and I have 20 staff to pay and my priority is to make sure they are paid and OK," says the Briton, who lives in Dubai. "All of my savings and personal money will go into filling the gap left from reduced revenue and clients not paying."
She received a one-month holiday on her home mortgage with Abu Dhabi Commercial Bank, though interest will continue to accrue. She was advised by her bank that the remaining loan tenure may increase as an effect of the deferment, while service fees for the request were waived.
Ms Hatherall-Shawe says her bank has been responsive and helpful. "I was disappointed at one month initially, but they [then said] that they did offer up more potentially if I met the criteria," she says. "Given the nature of my business and the fact we are unlikely to get anywhere back to normal until September onwards, I am likely to apply.”
The process to receive a home loan deferment can be relatively straight forward, according to Arran Summerhill, director of Holo, a mortgage broker in Dubai. Banks typically want to receive an email detailing how the coronavirus has affected a borrower economically, including evidence such as a salary reduction letter, he says.
“We’ve tried with six different banks now. We’ve not had a bank that has come back and actually declined a client’s request,” he says.
Clients that have been able to secure deferments include a landlord with multiple units, who was able to receive a loan holiday from the bank partly because his tenants were telling him they were struggling to meet monthly rent payments.
Mr Summerhill, says the impact of a job loss or salary reduction will often be greater on a household than a landlord, who can be expected to have multiple revenue streams.
“We’ve had households who reached out to their lenders and they seem to be very grateful for the fact it’s been a fairly smooth process for the banks to agree these payment delays,” he says.
Haresh Lalwani, managing director at Right Move Mortgage Broker, believes it’s logical for banks to try to provide relief for borrowers at this time and says it is positive for a brand if a lender is proactive.
“People remember which bank supported them during the tough times," he says. "So definitely, it’s a huge plus for them.”
Mr Lalwani benefited himself from a rent relief when his landlord, Sultan bin Ali Al Owais Real Estate. announced a 45-day rent waiver for its tenants at the end of March.
While relief on rents or loans is commonplace, the situation for credit card debt is also more variable, with some banks offering repayment holidays and others not.
Ms Musa says some banks are offering credit card customers the option to postpone their repayments by one month, with deferred interest, while other banks have also reduced their late payment fees on credit cards.
Cardholders may also be able to benefit from 0 per cent interest deals on balance transfers, she says. “Some banks are offering this interest-free deal for up to 12 months, making it a great way for cardholders to repay and settle their outstanding credit card debt faster," she adds.
Commercial Bank of Dubai (CBD) is offering a one-month payment holiday for all customers on credit cards and other loans. Customers affected by Covid-19 can also defer their instalments for up to three months.
So far CBD has helped 3,000 customers in the UAE, says Amit Malhotra, general manager, personal banking group. “We are one of the lead banks in the Dubai banks combined relief measures package offer, and we have also undertaken several other initiatives to support our customers during the current coronavirus pandemic,” he says.
Mashreq is also offering a payment holiday of up to three months with no extra fees or charges to “a sizeable number” of the bank’s credit card, home loan and personal loan customers, though current interest rates apply. The banks says it reaching out to these customers directly.
Not all debtors can secure relief from the banks, however. Borrowers who already defaulted on their loans before the crisis are not eligible for financial relief measures such as repayment holidays, despite the financial effects of the crisis worsening their situation, says Ms Musa. Non-residents do not qualify for relief either.
“It is best for such borrowers to approach their bank to see what debt relief options are available to them, and whether the bank can restructure their debts to make repayments more manageable,” she adds.