As the shock waves from the banking crisis of 2008-09 reverberated through the global financial system, the media carried numerous reports of indebted expatriates fleeing the UAE.
No one knows how many left their debt behind, but it is well documented that some fled because they had loans and credit cards they could not afford to pay back.
“It was a very big problem in 2008 and 2009 when the financial crisis hit. A lot of people lost their jobs and couldn’t pay the banks back,” says Ambareen Musa, the founder and chief executive of the money comparison website Souqalmal.com.
However, many have not learnt the lessons of those who were caught out by the crisis. Overindebtedness remains an issue in the UAE.
While in other parts of the world borrowers in distress can declare bankruptcy, that option does not fully exist in the UAE.
So how do those struggling to make loan and credit card repayments get out of debt for good?
The overall process is by no means easy, but the first step is surprisingly simple.
“Make a list of everything that you owe,” says Preeti Bhambri, founder of the personal finance website moneycamel.com.
“People are so busy running their lives. When people get to a point where they are paying 70 to 80 per cent of their salary in financial payments, they don’t even know how much they have and to whom they owe what.”
Once you have worked that out, the next step is to compare the interest rate on every loan and aim to pay off the most expensive first. In the UAE that is generally a credit card, which tends to be around 36 per cent, compared to a personal loan, which would be around 12 to 15 per cent if it was an especially high rate.
“Then on the other side you need to sit down and look at what income you have and look at your expenses,” says Ms Musa.
“Cut down every single expense that is potentially not necessary. Literally go to the bare minimum. Then you get a number for how much you can use to repay your debt every month.”
If you are below the 50 per cent threshold – that is, your debt repayments are no more than half of your salary each month as per the law, you could seek a consolidation loan, which is available from banks including ADIB and Dubai Islamic Bank.
There are also banks which offer free balance transfers for the first six months, such as HSBC.
“The attempt should be in terms of a balance transfer to pay off as much as you can in that time,” says Ms Bhambri.
However, if after analysing your financial situation there is no spare money to pay off debt and you are struggling to make repayments, the only option is to approach the banks.
Emiratis who have bounced a cheque can have their debts settled by the Higher Committee for Debt Settlement Fund for Nationals, but expats are not exempt from criminal charges.
“I have seen people literally just walk out of the country because of the [threat of a] jail sentence, just literally drop everything and walk out with their passports,” says Ms Musa.
But even if a debtor is not in jail, banks can legally impose a travel ban by reporting debtors to the authorities – to prevent them from leaving the country before the debt is settled.
The key to preventing this is to be honest with your bank.
“Let’s say a customer misses a payment. We will call up a customer and first we ask them to make a payment, but if the customer says I am in financial stress right now and need some help, we say come and meet us, we have people to discuss the issue,” says Tooran Asif, head of personal banking at Mashreq, adding that like all banks it has a collections department whose remit is to recover the money.
The number of people who cannot afford to repay their loans in the UAE is “small and consistent” across the industry, says Mr Asif.
People with short-term problems, such as those who are between jobs may receive a payment holiday. Or those with multiple lending facilities could be offered debt consolidation.
“The [last option] is if a customer is really in financial stress and there is no temporary solution, there is no consolidation solution, so [we would offer] debt restructuring,” adds Mr Asif.
This would typically offer the customer a loan with a longer tenure and lower instalments.
HSBC works with its customers in a similar way. Like all banks, it has a special team to deal with people who are struggling.
“Our experience is that early contact gives us a much better opportunity to develop an effective solution. If any of your readers are in this situation, we encourage them to contact us and we will work with them to find a solution,” says Khalid Elgibali, head of retail banking and wealth management for the UAE and Mena at HSBC.
Experts say working with the banks may not solve a person’s debt problem overnight, but it will represent a significant step towards settling the debt.
“Then you can start all over again,” says Ms Musa.
Case studies
Dozens of readers have contacted The National in recent weeks with tales of mounting debts they cannot afford to repay. Yesterday, we highlighted some of those stories in The National's business section. Here Preeti Bhambri, founder of the comparison website moneycamel.com, advises three of the cases mentioned on how to solve their personal debt crises:
Ravikanta Olivera, 47, from India
Total debt: Dh250,000 on five credit cards and two loans to six banks.
Salary: Was earning Dh3,300 but now unemployed.
Ms Olivera was working as an executive housekeeper in Dubai until last month when she gave up work after suffering from a second stroke. She now cannot afford her repayments. Her husband, Lenson, who owes around the same amount, has been in touch with her banks about his wife’s condition. He sent a letter to one bank with a petition to waiver her outstanding loans because of her medical history. The credit card providers have refused this option. She has Credit Shield with one of the financial products and is waiting to hear back whether it will apply.
Preeti Bhambri advises: It is shocking to see that this individual has taken debt amounting to 20 times her salary. Barring the first two to three banks that would have extended her the debt facility, others would be aware of how leveraged she is and thus the risk associated with her situation. And since banks are aware of the risk, they [should] also be willing to settle if approached with a logical solution. The couple are still based in Dubai and cannot ignore the banks, or else there will be court proceedings, so they have to reach an agreement with each bank. The agreement should be to stop levying any more interest on existing debt, to agree on a settlement amount – as the current amount will be inflated with interest on interest – and lastly, decide a period within which these loans can be paid off. Negotiate for a payment break for the next three months. The first bank to approach should be the one with the largest loan. The couple will have to look for another family member to support them financially or, if health allows, for the lady to resume some kind of part-time work.
Gopal Kumar Choudhary, from India
Total debt: Dh327,000 on two loans and five credit cards.
Salary: Dh9,500.
He took a personal loan of Dh200,000 for an investment to lease a hotel, restaurant and club, which subsequently shut down. By then he had taken on more credit. Then he lost his job in February before getting another less well-paid position in May. His repayments are around Dh9,000 a month and his salary is Dh9,500. While Mr Choudhary has defaulted on payments for all of the credit cards, his request to reschedule his main loan has been approved and he has Credit Shield insurance on the second loan.
Preet Bhambri advises: Mr Choudhary should try to liquidate some assets from the failed investment project or any other assets back in his home country to get some headway with repayments here. Job loss insurance, which could have either given him a six-month payment break or paid a part of his EMI for a maximum of 12 months – each bank has a different policy – would have worked for him while he was unemployed but will not work now. He will have to reach an agreement with all of the banks individually to stop them levying more interest and help him restructure the debt amount. Apart from the loan he has a restructuring deal on, he should start to pay off just one more card (that has a lower balance) until he owes nothing on it. In the meantime he must make the banks aware of his intentions to repay so they don't pursue him in a lawsuit. He can then slowly repay them one by one. It would also be worth exploring part-time work options over and above his regular job.
Ankit Thapa, a 25-year-old Nepalese sales merchandiser in Dubai
Total debt: Dh42,000.
Salary: Was earning Dh3,700 but currently unemployed.
Mr Thapa took a Dh42,000 loan in March so that his family in Nepal could shore up their house, which was just made of mud and wood, but it was destroyed in the earthquake. He asked his company for a holiday to support his family but was refused. He couldn’t concentrate at work so was asked to resign or be sacked. He resigned to get extra benefits such as the final salary payment but now he cannot pay the loan instalment and cannot find another job. (Mr Thapa’s name has been changed.)
Preeti Bhambri advises: He should look for a new job, even if it's a lower salary (at least temporarily), preferably with accommodation and food. This would get him a legal UAE visa and allow him to use his income for repayments and even to support his family. In the meantime he should contact the bank about his situation to request a payment break until he finds a new job.
pf@thenational.ae
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Real estate tokenisation project
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
The National's picks
4.35pm: Tilal Al Khalediah
5.10pm: Continous
5.45pm: Raging Torrent
6.20pm: West Acre
7pm: Flood Zone
7.40pm: Straight No Chaser
8.15pm: Romantic Warrior
8.50pm: Calandogan
9.30pm: Forever Young
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What is the FNC?
The Federal National Council is one of five federal authorities established by the UAE constitution. It held its first session on December 2, 1972, a year to the day after Federation.
It has 40 members, eight of whom are women. The members represent the UAE population through each of the emirates. Abu Dhabi and Dubai have eight members each, Sharjah and Ras al Khaimah six, and Ajman, Fujairah and Umm Al Quwain have four.
They bring Emirati issues to the council for debate and put those concerns to ministers summoned for questioning.
The FNC’s main functions include passing, amending or rejecting federal draft laws, discussing international treaties and agreements, and offering recommendations on general subjects raised during sessions.
Federal draft laws must first pass through the FNC for recommendations when members can amend the laws to suit the needs of citizens. The draft laws are then forwarded to the Cabinet for consideration and approval.
Since 2006, half of the members have been elected by UAE citizens to serve four-year terms and the other half are appointed by the Ruler’s Courts of the seven emirates.
In the 2015 elections, 78 of the 252 candidates were women. Women also represented 48 per cent of all voters and 67 per cent of the voters were under the age of 40.
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NO OTHER LAND
Director: Basel Adra, Yuval Abraham, Rachel Szor, Hamdan Ballal
Stars: Basel Adra, Yuval Abraham
Rating: 3.5/5
Our legal consultant
Name: Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants
The rules on fostering in the UAE
A foster couple or family must:
- be Muslim, Emirati and be residing in the UAE
- not be younger than 25 years old
- not have been convicted of offences or crimes involving moral turpitude
- be free of infectious diseases or psychological and mental disorders
- have the ability to support its members and the foster child financially
- undertake to treat and raise the child in a proper manner and take care of his or her health and well-being
- A single, divorced or widowed Muslim Emirati female, residing in the UAE may apply to foster a child if she is at least 30 years old and able to support the child financially
UAE currency: the story behind the money in your pockets
Hotel Silence
Auður Ava Ólafsdóttir
Pushkin Press
The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5
Biog:
Age: 34
Favourite superhero: Batman
Favourite sport: anything extreme
Favourite person: Muhammad Ali
THE%20SPECS
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The specs
Engine: 3.0-litre six-cylinder turbo
Power: 398hp from 5,250rpm
Torque: 580Nm at 1,900-4,800rpm
Transmission: Eight-speed auto
Fuel economy, combined: 6.5L/100km
On sale: December
Price: From Dh330,000 (estimate)
Indoor cricket in a nutshell
Indoor Cricket World Cup – Sep 16-20, Insportz, Dubai
16 Indoor cricket matches are 16 overs per side
8 There are eight players per team
9 There have been nine Indoor Cricket World Cups for men. Australia have won every one.
5 Five runs are deducted from the score when a wickets falls
4 Batsmen bat in pairs, facing four overs per partnership
Scoring In indoor cricket, runs are scored by way of both physical and bonus runs. Physical runs are scored by both batsmen completing a run from one crease to the other. Bonus runs are scored when the ball hits a net in different zones, but only when at least one physical run is score.
Zones
A Front net, behind the striker and wicketkeeper: 0 runs
B Side nets, between the striker and halfway down the pitch: 1 run
C Side nets between halfway and the bowlers end: 2 runs
D Back net: 4 runs on the bounce, 6 runs on the full
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Three ways to boost your credit score
Marwan Lutfi says the core fundamentals that drive better payment behaviour and can improve your credit score are:
1. Make sure you make your payments on time;
2. Limit the number of products you borrow on: the more loans and credit cards you have, the more it will affect your credit score;
3. Don't max out all your debts: how much you maximise those credit facilities will have an impact. If you have five credit cards and utilise 90 per cent of that credit, it will negatively affect your score.
Fixtures
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Colette
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Starring: Keira Knightley, Dominic West
Our take: 3/5
The Laughing Apple
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The biog
Profession: Senior sports presenter and producer
Marital status: Single
Favourite book: Al Nabi by Jibran Khalil Jibran
Favourite food: Italian and Lebanese food
Favourite football player: Cristiano Ronaldo
Languages: Arabic, French, English, Portuguese and some Spanish
Website: www.liliane-tannoury.com
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Living in...
This article is part of a guide on where to live in the UAE. Our reporters will profile some of the country’s most desirable districts, provide an estimate of rental prices and introduce you to some of the residents who call each area home.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
In numbers: PKK’s money network in Europe
Germany: PKK collectors typically bring in $18 million in cash a year – amount has trebled since 2010
Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm
Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year
Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”
Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners
TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013
The Bio
Favourite place in UAE: Al Rams pearling village
What one book should everyone read: Any book written before electricity was invented. When a writer willingly worked under candlelight, you know he/she had a real passion for their craft
Your favourite type of pearl: All of them. No pearl looks the same and each carries its own unique characteristics, like humans
Best time to swim in the sea: When there is enough light to see beneath the surface
