UAE debt problem to be tackled at school level

In conjunction with the Emirates Foundation, the Government is trying to teach fiscal responsibility at a young age.

ABU DHABI // Fancy cars may be everywhere on the streets of the UAE, but the roads are not paved with gold. Most of those beauties are financed by banks; and many of their owners deeply in debt.

As a result, the Emirates Foundation and the Ministry of Education have teamed up to educate young people and to tackle the problem of financial illiteracy.

As part of a four-year plan to overhaul the Government school curriculum, the Ministry of Education will sharpen its focus on budgeting and personal finances as one of seven key disciplines.

The new lessons will be taught in Grades 1, 4, 7 and 10 starting in August.

“We have been working with Emirates Foundation since last year and have developed a map for all teachers to embed the seven concepts into the new education material,” said Khawla Al Mualla, assistant undersecretary for educational policies.

“These will not be separate subjects to be taught to students but will be included in the core subjects such as English, Arabic and so on. Financial literacy will be taught throughout but will be more concentrated in mathematics.

“All students will be educated in financial literacy and soon this will extend to encompass grades 1 through 12.”

Dr Najwa Al Hosani, curriculum division manager at Abu Dhabi Education Council (Adec), said that while it was not part of the Emirates Foundation initiative, “financial literacy is at the heart of our mathematics curriculum”.

Research conducted by McKinsey & Company consultants for the Emirates Foundation in 2011 showed that 70 per cent of Emiratis under-35 are in debt.

Banks do nothing to improve the situation, encouraging customers to take out unsecured loans up to four times their annual salaries.

Non-payment of loans has led to arrest warrants and jail time.

Last year, cases were filed against 3,638 Emiratis in Abu Dhabi judicial courts for bounced cheques.

During the same year, the debt settlement fund created in 2011 by President Sheikh Khalifa resolved the debts of 2,700 Emiratis out of 6,000 applicants, paying more than Dh1.8 billion to banks.

Dr Sabha Al Shamsi, director of social inclusion at the Emirates Foundation, hopes that increased financial literacy will “create a society where young people are aware of the risks of debts”.

The foundation launched its Esref Sah (Spend Right) programme in 2012 to educate Emiratis on financial issues, including the risk of too much debt, how to budget and how to calculate interest rates.

Other experts say, however, that Emiratis are so well versed in finance that they use their knowledge to increase their debt loads beyond generally accepted limits.

“The Emirati customer is well educated and aware,” said an Emirati NBAD representative. “He now knows exactly what loan to take with the lowest interest. They compare prices and will often visit other banks to find the best offer.

“Many times they will argue with us and try to make us reduce our interest.”

Zuhni Saqr who worked for NBAD from 1977 to 2014, said that during the 1970s most Emiratis applied for short-term personal loans whose payments were made from property income.

He said that back then, “Emiratis were very careful with their money and life was simpler”.

“Their salaries covered their basic needs so they would only apply for a loan to buy property or go abroad for medical treatment,” Mr Saqr said.

Problems began at the end of the 1980s when car loans, credit cards and other loans were introduced with light regulation.

Salah Al Halyan, managing director of a global financial consultancy, stressed that debt alone was not bad. But “the worst debt is when you have no assets and no investments”.

He said that the rate of Emiratis with that kind of debt was one of the highest in the world.

“The culture here is of spending. The main remedy is to change the culture, educate Emiratis and change their financial behaviour.

“The media has to spread awareness, schools have to educate students about personal finance, and banks must work responsibly to minimise personal debt,” he said.

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About this special report:

A study by McKinsey & Company in 2011 showed that 70 per cent of UAE nationals younger than 35 are in debt. Car loans are the most popular with Emiratis and unregulated banks do nothing to improve the situation by encouraging locals to take out unsecured loans up to four times their annual salaries. Non-payment of loans has led to countless arrest warrants and jail time. Last year, 3,638 Emiratis had cases filed against them in Abu Dhabi judicial courts for bounced cheques. As a result, the Emirates Foundation and the Ministry of Education have teamed up to educate young people, and tackle the problem of financial illiteracy that plagues the country.

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