Borrowers dropped to 28%, says Department of Economic Development
Abu Dhabi-based UAE nationals have been discouraged by new measures on personal borrowing introduced in the first quarter of the year, said a survey carried out by the Department of Economic Development Abu Dhabi.
The number of borrowers dropped to 28 per cent, according to the survey carried out in March this year. In addition, about 45 per cent of UAE nationals said they built a house from borrowed money, while 36 per cent changed their car. This shows a significant change in borrowing behaviours, reflecting a more prudent approach, as investment in real estate is considered a life time saving that carries handsome returns apart from providing a sense of security and shelter.
Also 12 per cent of UAE nationals interviewed used loans to make investment or business, five per cent borrowed money to provide for the expenses of marriage and only two per cent borrowed for travelling.
The Central Bank of the UAE, in the period after the global financial crisis of 2008, carried out wide ranging reforms in the financial sector by introducing new rules that ask for higher per cent of borrower's equity to a mortgage or auto finance, besides trimming the tenor of loan. Several measures were taken which discouraged banks to dole out credits.
In the case of the UAE nationals, who defaulted on their loans, an amicable solution was provided for them to clear their debts from a generous lifeline provided by The President, His Highness Shaikh Khalifa bin Zayed Al Nahyan.
The rise in inflation also had its impact on UAE nationals, which was evident from the survey's findings. Most Emiratis believed that food prices are rising though it did not change their consumption pattern of what they called daily consumed items. Family spending rose to Dh25, 952 per cent in February, up against Dh22, 977 per cent on average in November 2013, due to growing inflation.
The results of the March 2014 survey showed that about 64.9 per cent of anticipated expenditure is to rise in the next quarter.