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As of April, 2017, it was observed that the lending market in United Arab Emirates (UAE) had progressed very slowly and as a result, even the borrowers had felt the crunch a little. Two factors that impacted the lending market the most include drop in price of oil and Arab Spring. In fact, these played an instrumental role in adversely affecting the investor confidence and liquidity in the market. This in turn caused several banks to tread cautiously as far as lending is concerned.
It holds true especially for the banks that operate in the private sector, more appropriately for the lending activities that take place in the real estate market in UAE. Simultaneously, the cost of lending by banks also increased comparatively due to the spending cuts that marked the Middle East. This resulted in slump in growth of economy and also gave rise to less credit demand.
Collateral and secured lending
When it comes to secured lending and use of collateral, there is a slight difference between the same with regards to the onshore as well as the offshore companies. In both the instances, collateral is allowed, albeit stringent norms and restrictions. These include using security for the transactions that involve the following-
• Shares
• Cash deposits
• Receivables
• Real estate or land
• Stock and machinery (tangible movable property)
The New Pledge Law has been formulated to govern the use of security over a wide array of property that is movable and located onshore in the United Arab Emirates. This applies to both tangible and intangible. However, the new law will not apply to the use of security for assets that do not fall within the purview of the New Pledge Law.
With regards to foreign lenders, it should be borne in mind that under certain conditions ownership of land may be restricted to UAE nationals (or GCC) in certain Emirates. However, in case of Dubai, the scenario is a bit different and it allows “foreign ownership of land” provided the same is in areas that have been designated.
And it is for this reason that such restrictions might impact the value perceived by lenders for any security that they are using as collateral. This can be better understood with the help of an example. For instance, if you are using security for real estate in an area that has not been designated as “freehold” or if you are opting for shares in any company that has been set up onshore, you have to bear in mind the maximum number of shares that the foreigner is allowed to own.
Loans for business entities in UAE
If you are planning to avail loans for your business in UAE, there are few banks that you can turn to for financial aid and the names of these banks are as follows. Also, check out the features and vital aspects related to these banks that have been listed here-
Abu Dhabi Commercial Bank (ADCB)
• Offers several products related to business solutions
• 7 days approval time
• Deals in Business insta-loans, commercial assets, working capital
Emirates NBD
• Repayment term is flexible
• No collateral required
• Credit and Term Insurance attracts low premiums
• Top-up facility available
National Bank of Ras Al Khaimah (P.J.S.C) RAKBANK
• Free collateral
• Repayment mode flexible up to period of 60 months
• Higher loan amount limits
Commercial Bank of Dubai (CBD)
• Processing time 5 days
• Low early settlement fee
• No collateral required up to AED 2 million
The features and their related figures might change from time to time and it is the sole discretion of the individual banks in this regard.
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