Al Etihad Credit Bureau, the agency conceived to help prevent another boom-and-bust credit cycle in the UAE, has opened for business.
Residents who have had a loan application rejected and who want to find out why, or those who are curious to find out how creditworthy they are, can head to the bureau’s headquarters on Al Falah Street next to the Finance Ministry in Abu Dhabi, or the bureau’s Dubai office on Sheikh Zayed Road.
Residents will need to present their Emirates ID, passport and a Dh110 fee. The process should not take any longer than 10 to 15 minutes, said the bureau’s customer service representatives.
“As of today, both financial institutions and UAE residents are able to obtain credit reports with a data accuracy rating of 99.5 per cent, which surpasses international standards of credit data quality and accuracy,” said Marwan Lutfi, the chief executive of the bureau, at a conference at the agency’s Abu Dhabi headquarters.
“These credit reports will help individuals to understand their debt levels and have a clearer picture of their financial obligations. This will in turn enhance their ability to plan for future borrowing and manage their finances responsibly.”
A credit bureau has become especially urgent in the emirates, where debt per capita stands at about US$95,000 per head, higher than global norms, industry executives have said.
So far, the credit bureau has uploaded 90 per cent of consumer credit data provided by banks and financial institutions for the past 24 months, Mr Lutfi said. The database currently includes information on2.8 million individuals, which represents 97 per cent of the population of the UAE that has some form of credit, he added. About 43 banks and financial institutions have submitted the credit data on their customers, and 29 have subscribed to the bureau’s credit reporting service, he said.
A federal law was passed in 2010 to establish the bureau, which requires all banks to participate, but it has gained traction only in recent months.
The bureau’s database of the credit history of all retail borrowers will enable banks to build an accurate picture of a potential borrower’s indebtedness, and allow them to assess his or her ability to honour the debt. Previously, banks could not check the credit history of customers relating to other lenders.
Experience in other countries shows credit bureaus can help to stop individuals with a poor credit history from amassing further debt, while easing the flow of credit to those able to repay loans. Banks benefit by generally not having to build such large provisions, or money put aside to cover bad debts against the risk of defaults.
Last month, Mr Lutfi said in an interview with The National that he was not concerned about rising credit growth and pointed to measures apart from the credit bureau, such as higher down payments for mortgages, as evidence the authorities were making sure that loans did not spiral out of control, as happened before the country’s 2009 debt crisis.
Last year, loans grew 9 per cent and analysts expect that figure to reach 10 per cent this year. Credit grew 41 per cent in 2008, according to figures from the central bank.
Eventually the credit bureau will add to its reports other forms of consumer obligations, such as telephone bills and other utilities. Firms in the UAE will also one day be able to access credit reports, Mr Lutfi said.
“The bureau will implement its second operational phase during the coming period,” he said. “This includes issuing credit reports on all companies in the UAE, which will feature bounced cheque details and telecommunications companies’ payment information for the past 24 months.
“We will announce the launch of other services in the future, which will be implemented throughout various phases,” he added.
“Specific dates will be announced early next year.”
Follow The National's Business section on Twitter