Addressing the rising tide of personal indebtedness in the UAE
The Debt Panel, an initiative of The National, includes a banker, the chief executive of a money comparison website, a wealth and wellness planner and a financial adviser who will, together, address people’s credit-related issues in a weekly column.
A panel of experts met for the first time in Abu Dhabi on Sunday to help address the problem of mounting levels of personal debt in the UAE.
They held a roundtable discussion on Sunday at The National’s office with two UAE residents who owe hundreds of thousands of dirhams and have monthly payments of more than their salaries.
They are among the dozens who have contacted the newspaper asking for help to get out of debt that include a mother-to-be with a monthly salary of Dh6,583 who has Dh252,000 of debt and another person who earns Dh29,000 but has Dh120,000 in credit card debt they cannot afford to pay.
According to Souqalmal.com, whose founder and chief executive, Ambareen Musa, sits on the panel, demand for personal loans on the website has risen by 153 per cent in the first quarter of this year. Ms Musa asked whether “people are going out to look for loans to sustain a lavish lifestyle, which, potentially, they don’t need to have".
How to help people avoid becoming over-indebted was a large focus of the roundtable. Ms Musa suggested a greater take-up of payment-protection insurance, which could help stem the rising tide of people who cannot afford to pay back their credit after losing their jobs.
Jamal Alvi, the chief credit officer at Abu Dhabi Islamic Bank, said that while lenders were always ready to work together with “willing" customers to restructure their debts the introduction of a bankruptcy law would make the process far easier.
Another panel member, Keren Bobker, The National’s On Your Side columnist and an independent financial adviser with Holborn Assets in Dubai, suggested that banks should also use cooling-off periods more, which would give people time to think about what they are taking on.
“I think things need to be set out for people to give them some breathing space to think, do I really need this loan, do I really want this level of credit?" said Ms Bobker.
“To be told when they take out a credit card out with a limit of Dh20,000, for argument’s sake, what that could mean if they spend all that kind of money. I don’t think that kind of thing is spelt out. Now some of us will sit down and work it out. But I don’t think most of us would."
Rasheda Khatun Khan, another panel member and financial life planner, said the problem has to be taken more seriously.
“We are trying to make this a more serious issue," agreed The National’s business editor, Mustafa Alrawi.
“We are trying to raise this. We are launching a weekly column that will look at this issue of rising personal debt and what can be done," he said.
Follow the Debt Panel in The National's weekly finance column.