‘Not the right time to save’ says UAE
The credit culture may have died down a bit, but maybe we still need some financial lessons – a recent survey shows the UAE has the worst savers in the region.
December 8, 2010 4:29 by Eva Fernandes
Given Kipp’s rather impromptu and unexpected holiday for the Islamic New Year, we decided to get some dreaded paperwork out of the way. The particular challenge yesterday was opening a new bank account. Armed with ten hours of sleep, a dossier of photocopies, and a mind prepared for long stretches of tiring bureaucracy, we were actually surprised with how painless the entire process was. And, along the way we learnt many interesting things, including the fact that the branch does not issue credit cards unless the holder can show they have a salary higher the Dh8,000.
What a difference from the days when packs of credit cards sales men would come around door to door with their promises of endless credit; when they’d ring you up and promise to set up a zero-balance account even without evidence of a regular salary. But those were the reckless days, pre-recession, when banks and consumers were racking up loans and debts like there was no tomorrow. It appears that things have changed.
Or have they? Credit may be hard to get, but that doesn’t mean the UAE’s residents have gotten financially savvy. A recent survey conducted by YouGov in conjunction with National Bonds has found that the UAE is home to the worst savers in the region.
The National Bonds GCC Savings Index, which surveyed more than 1,183 residents of the GCC across all countries, found that only 26 percent of Gulf residents actually saved regularly, despite the fact that 95 percent of them felt saving was important for the future (they want to save, but they don’t – Kipp’s life story).
Qatar (the darling state of the Gulf these days, it seems) scored the highest on the survey on two accounts. Apparently Qatari residents show the biggest commitment to regularly setting money aside for saving, which is probably because Qatar also has the highest saving environment with regards to saving tools, the economy and job opportunities.
But here in the UAE, the survey revealed that “people agree this is not the right time to put money aside.” Mark McFarland, emerging markets economist at Emirates NBD told Gulf News that the UAE consumer culture is, in part, to blame: “People [in the UAE] are much more geared towards spending and there are more avenues for spending their hard-earned cash here for shopping, leisure and retail outlets.”
And McFarland also said it was the “relative easy access to credit” enjoyed by UAE residents that encourages such spending (though Kipp’s lesson with the bank yesterday suggests there are some limitations).
So far a fairly predictable assessment of the situation, but it’s interesting in light of another recent report in Tuesday’s National announcing the formation of a UAE credit bureau. The credit bureau, which was set up under the patronage of Sheikh Khalifa, will centralize credit information of banks across all the Emirates. So the credit worthiness (or otherwise) of UAE residents will be on hand for all the banks to see.
Zaid Kamhawi, the chief business officer at Emcredit, a credit bureau based in Dubai, said: “This will strengthen the credit information legal infrastructure of the UAE by requiring banks and other financial institutions to provide their credit information.”
The news is interesting for two reasons: On the one hand it means the UAE is seeing the need to better regulate credit (about time if you are asking us). But on the other, the UAE also appears to be setting up the infrastructure for greater lending.
A more regulated credit market is a good thing, but more credit maybe less so – after all, Western economies have very efficient credit data sharing, and that didn’t stop the “credit crisis.”