Personal debt is a burning issue, but it's a problem that can be solved. As The National reported yesterday, delegates at The Debt Panel – One Year On session discussed how the stigma surrounding personal indebtedness has eased a little since the launch of this newspaper's advice column 12 months ago. The panellists have noticed that UAE residents who are struggling to meet their financial obligations are now more willing to seek professional help.
While this seems promising, we need to carry on the conversation about personal debt. Currently, experts say that the general level of financial literacy is very low. Many people are not credit- savvy enough to know about their monthly commitments or how interest rates are calculated and compound over time. And so, in the past, they have ended up borrowing far more than they can afford, driven in part by lax lending rules.
The cases the Debt Panel considers are often extreme – like the example of an Abu Dhabi resident who earns Dh7,000 a month and is weighed down by more than Dh200,000 worth of personal debt – but, according to officials, their plight does not reflect the norm. The number of those extreme cases may decline as a result of Al Etihad Credit Bureau’s work and tougher lending rules that limit the amount of debt a consumer could accumulate.
But to understand the situation better, there is still a need for more clarity when it comes to levels of personal debt. The Credit Bureau could release yearly statistics on debt trends among the population, including a breakdown between Emiratis and expatriates, who would naturally have contrasting levels of indebtedness and differing degrees of risk attached to them.
It’s also important to continue the fight against unlawful cold calling by banks, which can encourage people to take ill-conceived financial risks.
