The new Al-Etihad Credit Bureau will increase the lending appetite of the UAE’s banking sector, Cyril Garbois, partner at US consultancy firm AT Kearney, based in Dubai, tells MEED.

Since the financial crisis and the fallout of Dubai’s property crash in 2009, UAE banks have been battling with high volumes of non-performing loans on their balance sheet.

Garbois says this has led to banks becoming typically more cautious about which firms and individuals they lend to.

“They have reduced risk appetite. [But] with the credit bureau they will be able to have more concrete facts about taking a loan decision and they will be incentivised to give more credit,” he says. “It is definitely positive – not just for the banks but for the overall economy.”

The credit bureau will open within the first quarter of this year and will specialise in providing UAE-focused credit reports and financial information. 

A lack of available credit history has hindered banks’ ability to assess potential customers, and has particularly deterred lenders from giving loans to small and medium-sized businesses.

Garbois’ comments follow the release of AT Kearney’s GCC banking report, which concludes that the wider region’s banks will grow at a slower but more sustainable rate than the rapid expansion in assets seen before the financial crisis.

“The growth is still quite impressive, with the average growth rate of about 10-12 per cent… which I believe is the rate the banks should continue to grow at during the next two to three years. It is a much more mature growth,” says Garbois.

Bank asset growth before the crisis hit 46 per cent in Qatar between 2006 and 2008, while it reached 32 per cent in the UAE for the same period.

The report also notes retail banking is growing at a faster rate than corporate banking in the GCC, except in Qatar and the UAE.

Banks are investing in their retail capabilities as it is seen as a more stable long-term business. It is also in response to demand for consumer banking services from a growing regional population.

“Retail is a more sustainable and predictable sector. It is less volatile than corporate banking,” says Garbois.