Whose fault is crippling debt?

For some people, the big dreams, luxurious lifestyles and reasonably easy ability to borrow large sums of money in the UAE prove to be too tempting. As a series of articles in The National this weekend reported, some residents find themselves saddled with debts they are simply unable to repay.

Each of the stories recounted featured its own sad details. There was the would-be entrepreneur whose business went bust and who then lost his job, took a lower-paid position and now has just Dh500 a month to live on after making his loan repayments. There is the executive housekeeper who suffered a series of strokes that landed her in a coma and unable to repay loans that totalled dozens of times her monthly salary. While the details vary, what doesn’t change is the high price that sometimes comes with easy credit.

But where should the blame lie? Should it rest with the person borrowing money they know they cannot really afford? Or should it rest with the banks that cold-call workers to offer mammoth loans – often without doing due diligence about the ability of the borrower to repay the sum and relying instead on tough debt laws in the UAE to force compliance?

Access to credit is generally good for society. Used prudently, it allows those with ideas and initiative to start businesses to create jobs and diversify the economy. Borrowing money to invest in oneself – such as to get an advanced qualification to boost one’s employability – is clearly beneficial.

But the key word in this is prudence. Responsibility is required on all sides: the borrower and the lender.

The government has helped the process by introducing the UAE-wide Al Etihad Credit Bureau last year so that a loan applicant’s true level of indebtedness could be ascertained. This ends the practice of the deeply-indebted worsening their situation by getting further loans from other banks. But both the banks and the borrowers have to take responsibility for themselves first and foremost.