ABU DHABI // An initiative to clear the debts of Emiratis is being expanded to include those owing more than Dh1 million.
A loans fund created on National Day last year on the orders of the President, Sheikh Khalifa, has already dealt with more than 70 per cent of Dh2 billion owed by 6,830 Emirati debtors.
The fund targets citizens who are in jail, are detained pending trial or have lawsuits filed against them for debt. It had been limited to debts of less than Dh1m. A new maximum has not been decided.
Eight banks also signed an agreement with the fund's committee agreeing to write off 50 per cent of the debtors' loans.
The other half will be settled by the loans fund, which will recoup it by deducting up to 25 per cent of the debtor's salary each month. No interest will be paid.
Debtors will not be allowed to apply for loans while they are still paying off the fund.
Ahmed Al Zaabi, the deputy presidential affairs minister and head of the fund's committee, said the initiative would teach Emiratis to avoid the loan trap in future and prompt a culture of saving.
"This accomplishes more than one goal at once," he said. "It reduces living cost burdens on citizens who are unable to pay off their debts and helps in raising awareness of the dangers of unlimited loans for unnecessary materialistic reasons."
Mashrek Bank, First Gulf Bank, Abu Dhabi National Bank, Abu Dhabi Commercial Bank, Union National Bank, Standard Chartered, RAK National Bank and Abu Dhabi Islamic Bank signed the agreement yesterday.
Mohammed Al Rumaithi, the ministry's undersecretary for finance and purchasing, said most of the country's 52 banks had agreed to be part of the initiative and none had so far refused.
Under the agreement the banks will be responsible for managing loans on behalf of the fund and recouping its money. The banks will also be responsible for receiving applications from Emiratis seeking help from the fund.
Tirad Al Mahmoud, the chief executive of Abu Dhabi Islamic Bank, described the initiative as "the right thing to help the most challenged segment of the consumer market".
He said the initiative benefited not only debtors and their families, but also the banks.
"We are working as partners with the Government on providing solutions, a role we are very proud to take. We believe this type of partnership is ideal."
Asked about any fiscal consequences to the banks taking a "haircut" on the debts, he said: "I'm not going to go into the mathematics because the issue for us is not mathematics - it is the ethics."
The fund's committee is made up of representatives from the Ruler's Court, Abu Dhabi Department of Finance, the Central Bank and the Justice Department in Abu Dhabi.
It was established after a decree from Sheikh Mansour bin Zayed, the Deputy Prime Minister and Minister of Presidential Affairs, on the orders of the President.
