UAE retail banking heads have said the lack of a credit bureau was a significant factor in the high rate of delinquency in consumer loans over the last two years. Without such a body, banks were unable to profile the creditworthiness of customers.

“The credit bureau is the bedrock of lending decisions in most parts of the world,” says Fergus McDonald, managing director and country head of Barclays Corporate in the UAE. “The problem here was that banks didn’t have visibility on the debt obligations of individuals and they were unable to share data with other banks.”

Mark Yassin, senior general manager of corporate and investment banking at National Bank of Abu Dhabi (NBAD) also stressed how a credit bureau could have helped mitigate the problem. 

“It was much harder for banks to carry out due diligence,” says Yassin. “As a result, some of them just became greedy and were giving out loans to anyone who walked in. Especially in today’s market, a credit bureau is important so banks can record delinquencies.”

The UAE’s retail banks have suffered from a high rate of delinquencies in their consumer lending since the global financial crisis hit the region in September 2008, sparking a wave of redundancies and salary cuts. Expatriates comprised 85 per cent of the country’s 4.5m population and many fled the country in the wake of the crisis.

However, the rate of delinquencies and loan defaults has significantly slowed down according to industry insiders.

“Our delinquencies have fallen by 50 per cent to date in 2010 compared to the first half of 2009,” says Simon Cooper, deputy chairman and chief executive of HSBC. “It was a short-term problem for our bank.”

The industry heads were speaking at MEED’s Middle East Retail Banking 2010 conference held from 27-28 September.