DUBAI // Major international banks are taking a softer approach to customers with outstanding debts, in an effort to stem a sharp rise in unpaid credit card bills and loans.
While they have reassigned scores of employees to debt collecting, they have also introduced some unusually conciliatory measures to aid the heavily indebted.
These include readily reducing interest rates, extended grace periods on loan payments, and telephone help lines offering financial counselling.
They are also using sophisticated computer modelling to analyse customer profiles and spending patterns, and being more active in contacting those who they think are in danger of default.
The moves are intended to be co-operative, not punitive, bankers emphasise, although some banks are still unilaterally slashing limits on credit cards and raising fees.
Redundancies and pay cuts have led to large numbers of customers fleeing the country and abandoning their financial obligations, senior bankers say, leaving behind mountains of outstanding debt.
In the case of HSBC, one of the country's largest lending institutions, with about 300,000 retail banking customers, absconding residents, or "skips", account for half the bank's bad debt.
"We have experienced a rapid increase in skips since the autumn of 2008 and there are few signs that this is abating," George Lennox, the head of PFS credit at HSBC Middle East, said in an e-mail statement.
Most had absconded to India, the Philippines, Pakistan or Britain, he said, and typically had worked in "areas of the economy most affected by the current conditions, ie construction, sale of property, etc".
Some analysts, however, believe the banks' moves may not be enough to staunch the flow of absconders and the associated rise in defaults for some time.
"We expect credit card defaults will be sharply higher in the second quarter, and non-performing loans from unsecured lending sharply higher in the second quarter," said Raj Madha, a financial sector analyst at EFG Hermes. Banks' second-quarter financial results should be available next month.
There was also anecdotal evidence that some employees might not have received their final salaries, Mr Madha said.
"If this is widespread, then clearly those people would be feeling aggrieved and would be far more likely to skip without clearing their outstanding financial obligations."
Bankers acknowledge the difficulty of deterring absconders, and admit tracking them down can be equally challenging.
"Specifically in the UAE, the situation of over-leveraged customers is very high," said Sanjoy Sen, Citibank's head of consumer banking in the Middle East. "But what makes this market different is that there is no regulatory framework in terms of credit bureaux, and there is a high population in terms of expats."
Indeed, partly because of the scale of the problem, officials at some banks conceded that they had not introduced additional measures to address the issue.
But for those that have, trying to seek out debt-saddled customers from a non-punitive perspective is considered the best option.
"The whole approach is that you help a customer through a credit cycle - you don't push him into a corner," Mr Sen said.
Citibank, for example, has recently bolstered existing programmes such as Credit Shield, intended to help customers who have been made redundant or who have health issues to meet their credit obligations.
It has also begun redeploying employees to its debt-collection arm and giving them added training in such courses as "soft" negotiating.
"We've always had this, but we never promoted it actively," Mr Sen said. "But since the beginning of this year, we've been doing it more proactively."
Some banks are trying unconventional measures to help debtors overcome social stigmas. HSBC, for example, recently introduced telephone helplines offering confidential financial counselling.
It is also more actively profiling industries most affected by the recession, said Mr Lennox.
"We carefully look for employers who are laying off staff and try to work with those companies to identify our customers who may be leaving. We then make contact and work out the best solution.
"We have operated these programmes since October 2008."
The outflow of debtors could soon be compounded by a possible population exodus.
According to a report released yesterday by Standard Chartered Bank, there is a significant risk of "a major population outflow in the upcoming months".
"Families with school-age children may wait until the end of the academic year before moving, and the impact could be substantial," the report said. "This would have a direct impact on the retail sector as well as real-estate prices".
hnaylor@thenational.ae
Election pledges on migration
CDU: "Now is the time to control the German borders and enforce strict border rejections"
SPD: "Border closures and blanket rejections at internal borders contradict the spirit of a common area of freedom"
At a glance
Global events: Much of the UK’s economic woes were blamed on “increased global uncertainty”, which can be interpreted as the economic impact of the Ukraine war and the uncertainty over Donald Trump’s tariffs.
Growth forecasts: Cut for 2025 from 2 per cent to 1 per cent. The OBR watchdog also estimated inflation will average 3.2 per cent this year
Welfare: Universal credit health element cut by 50 per cent and frozen for new claimants, building on cuts to the disability and incapacity bill set out earlier this month
Spending cuts: Overall day-to day-spending across government cut by £6.1bn in 2029-30
Tax evasion: Steps to crack down on tax evasion to raise “£6.5bn per year” for the public purse
Defence: New high-tech weaponry, upgrading HM Naval Base in Portsmouth
Housing: Housebuilding to reach its highest in 40 years, with planning reforms helping generate an extra £3.4bn for public finances
FFP EXPLAINED
What is Financial Fair Play?
Introduced in 2011 by Uefa, European football’s governing body, it demands that clubs live within their means. Chiefly, spend within their income and not make substantial losses.
What the rules dictate?
The second phase of its implementation limits losses to €30 million (Dh136m) over three seasons. Extra expenditure is permitted for investment in sustainable areas (youth academies, stadium development, etc). Money provided by owners is not viewed as income. Revenue from “related parties” to those owners is assessed by Uefa's “financial control body” to be sure it is a fair value, or in line with market prices.
What are the penalties?
There are a number of punishments, including fines, a loss of prize money or having to reduce squad size for European competition – as happened to PSG in 2014. There is even the threat of a competition ban, which could in theory lead to PSG’s suspension from the Uefa Champions League.
How The Debt Panel's advice helped readers in 2019
December 11: 'My husband died, so what happens to the Dh240,000 he owes in the UAE?'
JL, a housewife from India, wrote to us about her husband, who died earlier this month. He left behind an outstanding loan of Dh240,000 and she was hoping to pay it off with an insurance policy he had taken out. She also wanted to recover some of her husband’s end-of-service liabilities to help support her and her son.
“I have no words to thank you for helping me out,” she wrote to The Debt Panel after receiving the panellists' comments. “The advice has given me an idea of the present status of the loan and how to take it up further. I will draft a letter and send it to the email ID on the bank’s website along with the death certificate. I hope and pray to find a way out of this.”
November 26: ‘I owe Dh100,000 because my employer has not paid me for a year’
SL, a financial services employee from India, left the UAE in June after quitting his job because his employer had not paid him since November 2018. He owes Dh103,800 on four debts and was told by the panellists he may be able to use the insolvency law to solve his issue.
SL thanked the panellists for their efforts. "Indeed, I have some clarity on the consequence of the case and the next steps to take regarding my situation," he says. "Hopefully, I will be able to provide a positive testimony soon."
October 15: 'I lost my job and left the UAE owing Dh71,000. Can I return?'
MS, an energy sector employee from South Africa, left the UAE in August after losing his Dh12,000 job. He was struggling to meet the repayments while securing a new position in the UAE and feared he would be detained if he returned. He has now secured a new job and will return to the Emirates this month.
“The insolvency law is indeed a relief to hear,” he says. "I will not apply for insolvency at this stage. I have been able to pay something towards my loan and credit card. As it stands, I only have a one-month deficit, which I will be able to recover by the end of December."
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
A MINECRAFT MOVIE
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BORDERLANDS
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Four motivational quotes from Alicia's Dubai talk
“The only thing we need is to know that we have faith. Faith and hope in our own dreams. The belief that, when we keep going we’re going to find our way. That’s all we got.”
“Sometimes we try so hard to keep things inside. We try so hard to pretend it’s not really bothering us. In some ways, that hurts us more. You don’t realise how dishonest you are with yourself sometimes, but I realised that if I spoke it, I could let it go.”
“One good thing is to know you’re not the only one going through it. You’re not the only one trying to find your way, trying to find yourself, trying to find amazing energy, trying to find a light. Show all of yourself. Show every nuance. All of your magic. All of your colours. Be true to that. You can be unafraid.”
“It’s time to stop holding back. It’s time to do it on your terms. It’s time to shine in the most unbelievable way. It’s time to let go of negativity and find your tribe, find those people that lift you up, because everybody else is just in your way.”
Pari
Produced by: Clean Slate Films (Anushka Sharma, Karnesh Sharma) & KriArj Entertainment
Director: Prosit Roy
Starring: Anushka Sharma, Parambrata Chattopadhyay, Ritabhari Chakraborty, Rajat Kapoor, Mansi Multani
Three stars
THE SPECS
Engine: 4.4-litre V8
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Power: 523hp
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Price: Dh469,000
Tuesday's fixtures
Kyrgyzstan v Qatar, 5.45pm
FIGHT CARD
Bantamweight Hamza Bougamza (MAR) v Jalal Al Daaja (JOR)
Catchweight 67kg Mohamed El Mesbahi (MAR) v Fouad Mesdari (ALG)
Lighweight Abdullah Mohammed Ali (UAE) v Abdelhak Amhidra (MAR)
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Middleweight Sallaheddine Dekhissi (MAR) v Abdel Emam (EGY)
Catchweight 65kg Rachid Hazoume (MAR) v Yanis Ghemmouri (ALG)
Lighweight Mohammed Yahya (UAE) v Azouz Anwar (EGY)
Catchweight 79kg Omar Hussein (PAL) v Souhil Tahiri (ALG)
Middleweight Tarek Suleiman (SYR) v Laid Zerhouni (ALG)
Specs
Engine: Duel electric motors
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Torque: 1075Nm
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