The UAE's nascent credit bureau will begin operations next month to help banks assess the ability of clients to pay back debt.
“The first phase, which will be launched in September, will allow banks and financial institutions to access and purchase existing and potential customers’ credit reports electronically after submitting all the necessary documents,” said Marwan Ahmed Lutfi, the chief executive of the bureau. “Customers will also have access to their credit reports through our soon-to-be-launched customer service centres.”
Al Etihad Credit Bureau had already started to ask banks to submit financial data and is collecting information from lenders.
Bankers say that the bureau is likely to be good for consumers, as the most creditworthy bank customers will get better interest rates. The cost of financing in the UAE is hovering at lows of at least eight years. This has spurred a boom in borrowing and authorities are keen to prevent credit growth from spiralling out of control from such initiatives.
The bureau intends to create a database of the credit history of all retail borrowers to enable banks to build an accurate picture of a potential borrower’s indebtedness, allowing them to assess his or her ability to honour the debt. At the moment, banks cannot check the credit history of customers relating to other lenders.
Experiences in other countries show credit bureaus can help to stop individuals with a poor credit history from amassing further debt, while easing the flow of credit to those able to repay loans. Banks benefit by generally not having to build such large provisions against the risk of defaults.
A federal law was passed in 2010 to establish the bureau but moves to create the institution have only been stepped up in recent months.
Mr Lutfi, a former Dubai International Financial Centre official, has overseen a security audit of the system to ensure the efficient roll-out of the bureau’s services and the signing of agreements with all financial institutions requiring them to submit credit data to the bureau.
mkassem@thenational.ae
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Fund-raising tips for start-ups
Develop an innovative business concept
Have the ability to differentiate yourself from competitors
Put in place a business continuity plan after Covid-19
Prepare for the worst-case scenario (further lockdowns, long wait for a vaccine, etc.)
Have enough cash to stay afloat for the next 12 to 18 months
Be creative and innovative to reduce expenses
Be prepared to use Covid-19 as an opportunity for your business
* Tips from Jassim Al Marzooqi and Walid Hanna
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