Interpreting Middle East Economic News and Analyzing Market Trends

The UAE’s consumer debt on the rise, fueling spending across the country


For years now UAE banks have struggled to kick-start consumer loan growth as the corporate side was taking too long to recover from the financial crisis.  We reported last March that UAE banks were becoming more aggressive towards consumer lending and were back to pre-crisis sales tactics in order to growth their loan portfolios.  Now it seems that they got what they wanted only to set off alarm bells as some fear this growth has come too soon and is growing too fast.



Consumer lending growth has doubled across the Emirates as a wave of  credit-fuelled spending triggers warnings over excessive borrowing.

Credit cards and borrowing to buy cars drove up profits for UAE banks  reporting earnings this week after consumers took out loans worth Dh9.8 billion  more during the first five months of the year, already matching the increase for  the whole of 2012. If present rates of growth continue, 2013 is on track to  record twice as much new borrowing as last year.

Personal loans to residents have increased 3.8 per cent across the sector to  Dh270.7bn ($73.8 million) between January and May, according to the latest data available from  the Central  Bank. Data for June is yet to be released, but the total already outstrips  the Dh8.8bn ($$2.4 billion)rise in personal borrowing reported during all of 2012.

The increase comes as the Abu Dhabi Department of Economic Development warns  of the dangers of rising indebtedness among Emirati borrowers.

“It’s important to bring awareness to the sensitive subject,” said Jalal  Masaabi, a department spokesman at an event aimed at raising awareness about  credit-fuelled spending in the capital this week. “In the end we want a national  who is productive to the economy and not living pay cheque by pay cheque to pay  off their debt,” he said.

Big banks are reporting rapid growth from their retail books while their  corporate customers tread with caution. Sector-wide lending is up 2.9 per cent  between January and May, the same data showed.

The banking sector’s recovery from the property crash has helped to tempt  customers into  car showrooms in greater numbers as credit becomes more  freely available, according to analysts.

“We have more bank lending and that reverberates right through the economy,”  said Richard Adams, director and senior consultant at Acuity Middle East, a  consumer research company.

Emirates NBD’s credit card lending has grown by 14.3 per cent during the  first half of the year to Dh3.65bn ($995 million). Emirates Islamic Bank, its Sharia-compliant subsidiary, boosted  financing from credit cards by 20.9 per cent to Dh974m ($265.4 million) during the same  period.

National Bank of Abu  Dhabi reported personal loans of Dh27.2bn ($7.4 billion) so far this year, up 1.8 per  cent.

The bank’s retail deposits, on the other hand, have surged 22.9 per cent to  Dh49.5bn ($13.5 billion) in the same period.

Car loans also helped RAKBank to offset deleveraging among its  retail banking customers. The bank’s car loans grew 23.2 per cent to Dh1.52bn ($414 million),  the fastest growing segment of a retail lending portfolio which has held steady  this year.

Dealers sold more than 245,000 cars in the UAE in 2012 and Frost &  Sullivan projects the number could reach 370,000 vehicles this year.

Read the full story from The National.


Since the beginning of 2013, the UAE economy has been doing very well compared with the past 4 years.  Not only is consumer spending rising rapidly, the stock market is rising in tandem.  As of July 23, 2013, the Dubai Financial Market (DFM) us up 58% year-to-date.


What is clear from this is that the good times are back in the UAE, but for how long?  This is anyone’s guess.