UAE debtors in financial crisis ‘must not fear asking banks for help’

UAE residents with debts they cannot afford to repay must not be afraid to turn to the banks for help, experts say.

The National has received dozens of emails in recent weeks from readers on modest incomes who are in financial crisis because they have either defaulted on loans and credit cards, or their salary barely covers their monthly repayments.

Some have lost their jobs, while others have built up liabilities through failed business ventures. Many feel they have nowhere to turn.

“I have seen people literally just walk out of the country because of the threat of a jail sentence,” said Ambareen Musa, the founder and chief executive of the money comparison website, who urges customers in dire financial circumstances to have an open and honest conversation with their banks.

Financial institutions say they are willing to help debtors in financial distress restructure their debts.

“Early contact gives us a much better opportunity to develop an effective solution,” said Khalid Elgibali, the head of retail banking and wealth management for the UAE and Mena at HSBC.

Today and tomorrow, The National’s business and money sections are highlighting readers’ debt troubles and will look into how Al Etihad Credit Bureau, launched last November, can help to reduce the issue.

“The credit bureau will avoid debt problems, as individuals won’t be able to exceed the maximum as set by the Central Bank by shopping around and having loans with multiple banks,” said Jaap Meijer, the head of financial services research at the Dubai-based investment bank Arqaam Capital.

In one case, mentioned in our coverage, the mechanical engineer Gopal Choudhary, from India, has run up Dh327,000 in debts in under 18 months on two loans and five credit cards from a failed business venture.

He is determined to honour his repayments of Dh9,000 a month – even though he earns just Dh9,500.

“Two times I went to India and thought so many times about what to do but ultimately I decided that I would go back and see what needs to be done to get rid of this,” he said.

Ravikanta Olivera, also from India, has Dh250,000 in debt on five credit cards and two loans to six banks. She has suffered two strokes and is now unable to work and meet her obligations. The debt amounted to almost 20 times her Dh13,300 salary. And her husband is in a similar amount of debt.

Five years ago, the Central Bank issued guidelines to help protect residents from excessive debt by capping the overall total of instalments for loans – including personal, car, housing and credit cards – at 50 per cent of a borrower’s gross salary and income.

However, it appears to have been easy for some UAE residents to sidestep this rule.

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