One UAE-based financial institution is looking to help put more of its customers behind the wheel of fuel-efficient vehicles as rising petrol prices push up the cost of living in the emirates.
Dunia Finance’s latest “green” loan offers a 1 per cent lower rate of interest for environmentally friendly cars compared to its usual terms.
However, Dunia’s advertised rates on its regular car loans are already at the higher end of the market, according to data from comparison site souqalmal.com.
The “green” loans would also be processed by Dunia using “new age technology” including “digital apps, mobile services, paperless operations and statements”, it said.
Dunia did not provide specific details on which models it classifies as being eligible for the reduced rate of interest.
“In my view, like many markets in the world, there will be demand for smart cars in the UAE,” said Rajeev Kakar, Dunia’s chief executive. “Especially with the fuel deregulation policy, it gives an economic reason – in addition to keeping the environment clean.”
In July, the UAE government decided to change the way it calculates petrol prices, effectively trimming energy subsidies. The cost of 95 octane unleaded petrol rose 24 per cent to Dh2.14 per litre last month, up from Dh1.73 per litre in July.
The change in fuel pricing comes after the recent plunge in oil prices.
In over a year, crude fell from more than US$100 per barrel to almost $55 per barrel – adding pressure on the budgets of petroleum-exporting countries in the Arabian Gulf.
The UAE’s cost of living is rising, with the rate of inflation nationwide up to 4.9 per cent last month from August last year on the back of higher petrol prices. Transport costs rose 12 per cent in Abu Dhabi and 10 per cent in Dubai.
“Fuel-efficient cars may not be cheaper [at first], but the cost benefit comes later,” said Mr Kakar.
Mr Kakar said he was “optimistic” that there would be a strong uptake for Dunia’s “green” car loan, especially as people are acting more responsibly towards the environment.
The government, as part of the UAE Vision 2021, is focused on improving the quality of air, including monitoring and reducing pollution levels. The Abu Dhabi Environment Policy Agenda, released in February, also sets environmental performance targets for the reduction of per capita carbon emissions.
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