UAE Central Bank says lenders ‘increasingly risk averse with businesses’

Latest UAE Central Bank credit sentiment report indicates companies finding it more difficult to get loans.

UAE banks are becoming increasingly risk averse when weighing loans to businesses, the Central Bank said in its latest credit sentiment report.

The Central Bank’s findings confirm what bank executives have been saying in recent months as well as what has been revealed in some third quarter earnings.

“Despite ongoing demand growth, survey results suggest a reduced willingness to extend business loans among financial institutions, with changes in credit standards suggesting a higher degree of risk aversion,” the Central Bank said in the results of its third quarter survey, released on Thursday.

“This was evident in the reported tightening of credit standards pertaining to collateralisation requirements and premiums charged over riskier loans.”

Gulf Finance, a Dubai-based lender that funds small and medium sized-enterprises, said last week that a survey it conducted in the same period as the Central Bank about 13 per cent of respondents found it more difficult to raise money.

In the second quarter, however, no one expressed difficulty getting money to fund growth, according to the Gulf Finance survey.

Banks too are finding difficult to collect debt payments. United Arab Bank, the Sharjah-based lender, said this month that it lost Dh272.6 million during the third quarter because of bad commercial loans.

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