uae banks federation

MIRATISATION FINANCIALLITERACY CREDITBUREAU

EMIRATISATION FINANCIALINCLUSION MOBILEWALLET

COORDINATIONWITHBANKS CODEOFCONDUCT

CREDITBUREAU MOBILEWALLET BANKINGEXPERTS

SMEFINANCE CREDITBUREAU EMIRATISATIO

lending a hand in economic growthlending a hand in economic growth

Stableoutlook

SPECIALREPORT | APRIL 6, 2014

www.facebook.com/UAEBanksFederation @uaebf

l Executive Editor: Patrick Michael l Supplements Editor: Suchitra Steven Samuel l Sub-editor: Sadiq Shabanl Reporters: Farhana Chowdhury, Suneeti Ahuja-Kohli

l Design & Layout: Mohammad Ejaz Khan l Cover Design: Sidharthan l Imaging: Venugopal Prabhul Director Advertising: Haroon Qureshi l Senior Advertisement Manager (Supplements): Philip Smith

l DubAi HEAD OFFiCEP.O. Box 11243, Tel: +971 4 3383535, Fax: +971 4 3383345/46, E-mail: [email protected]

l Abu DHAbiP.O. Box 3082, Tel: +971 2 6337666, Fax: +971 2 6351122, E-mail: [email protected]

A PubliCAtiOn OF GAlADAri PrintinG & PubliSHinG llC

S P E C I A L R E P O R T

6 GrOwtH tOrEMAin FirMThe economy in 2014 isexpected to benefit frominvestments arising frommegaprojects as wellas Dubai’s successfulbid for Expo 2020, saysCentral Bank GovernorSultan Nasser Al Suwaidi

28

YEARS

CArinGFOr tHEnAtiOnAlS

As thegovernment istrying to strike abalance betweenopen-door policyand emiratisation,the banking

industry is playinga lead role

8 tHE liFEblOODOF tHEnAtiOnAlECOnOMyThe banking sector hasplayed a critical rolein the emergence ofthe UAE as the secondlargest economy in theMiddle East

11 Encouraging values andprofessionalism

12 Steering the UAEBanking Sector

14 UAE banks embracefinancial inclusion

16 Beyond plastic

18 Gaining traction inIslamic finance

22 Working together toaddress problems

26 Gunning for transparency

30 Be mindful of yourspending habits

4 KT Special RepoRTApril 6, 2014

Website: http://uaebf.ae www.facebook.com/UAEBanksFederation @uaebf

The banking industry witnessed a healthy growth in 2013. Theassets reached an all-time high of over Dh2 trillion against thebackdrop of improvingmacroeconomic performances, recoveringrealty market, and growing investor optimism about the MSCIcountry upgrade and the recent Expo 2020 win for Dubai.

The buoyant confidence in the industry, which constitutes theUAE’s 23 national banks and 26 foreign units, is a reflection ofthe healthy state of the national economy. The combined assetsof the banks at more than Dh2 trillion by the end of 2013 areup Dh34 billion from Dh1,991 billion at end of November 2012.Consequently, the credit market is now more accessible andliquid; fresh life has been infused in stalled projects, and newones announced.

It comes at a time when the authorities are studying macro-prudential policies to regulate the credit growth. We at the UAEBanks Federation are proud to play a pivotal role in thedevelopment of this space and work hand in hand with theCentral Bank and other stakeholders. The Federation hasprovided a unique platform to all banks for discussions andraised key areas of concern. Recently, the forum steereddiscussions on consumer mortgage loans and large exposures.The proposals of the respective committees were accepted bythe Central Bank and resulted in the Consumer Mortgage LoansRegulations 2013, and the Large Exposures Regulationintroduced in October and November 2013, respectively.

The year 2013 was also notable in terms of new committeesformed to deliberate on theway forward. MobileWallet Initiative,which forms an integral part of the Smart Government Initiative,is one of the best examples. The committee on Mobile Walletis working on a blue print and envisages providing a user-friendly platform by integrating technology with everyday life.The servicewould ease payments, transactions andmanagementof personal finances.

Besides, the Federation also promotes Emiratisation in thefinancial services sector, raises public awareness on Al EtihadCredit Bureau, Islamic banking and financial literacy, builds afavourable banking environment to enhance customers’confidence in banks, and encourages transparency and freemarket policy. The banking industry recognises the role of smallandmediumenterprises (SMEs) in an economy. The Federation’scommittee on SME Finance seeks to highlight concerns in thissphere and work with the Central Bank to promote andstrengthen this sector. The Federation developed and introducedthe Code of Conduct for banks last year, which aims to protectcustomers’ rights, enhance cooperation and promote faircompetition between banks, as well as reinforce cooperationwith the Central Bank and other official entities to better servecustomers, the community and the national economy.

Looking ahead, we are positive about the growth prospects forthe UAE. As real GDP growth is forecasted at around 4 per cent,we expect credit growth to strengthen further in 2014. On thisnote, the UAE Banks Federation would like to thank all the bankmembers and stakeholders, and look forward to their continuedsupport ahead.

ChAIRMAN’S MESSAGE

AbdulAziz Al GhurairChairman of the UAE Banks Federation

5KT Special RepoRTApril 6, 2014

UAE BAnks FEdErAtion


Developing a suppor tmechanism for the SMes isamong the big challenges forthe UAe Central Bank this year,

says Central Bankgovernor Sultan nasserAl Suwaidi. As the economy continues togrow at a firmpace and expects to register4.5 per cent growth in 2014, the CentralBank is keeping a close eye on theproperty sector and working to prop upsupport for the SMe sector. in an emailinterviewwithKhaleej Times, thegovernortalks about Al etihad Credit Bureau,challenges faced by the Central Bank, theneed to promote financial literacy andmuch more. Excerpts:

What is the outlook for economicgrowth in 2014?

According to recent iMF estimates, UAeeconomic activity expanded 4.5 per centin 2013. growth through 2013 wassupported by ongoing strength in thetourism and hospitality sectors while arecovery in real estate provided a furthercatalyst for growth. in 2014, economicgrowth is expected to remain firm at 4.5per cent. The UAe economy in 2014 isexpected to benefit from a solid pace ofinvestment arising from a number ofmegaprojects aswell asDubai’s successfulbid for Expo 2020. Similarly, recent trendsin passenger arrivals and the logisticssector are likely to further boost gDpgrowth in 2014.

The IMF has voiced concerns on apotential property bubble in the UAE

following the rapid rebound in realestate. What are your views?

Citywide average residential real estateprices grew at a rapid pace during 2013:24 per cent in Dubai and 21 per cent inAbu Dhabi. ongoing development activityand planned additions to the overallhousing stock this year is likely tocontribute to price stability.The Central Bank has recently

introduced a loan-to-value (lTv) cap thatshould encourage prudent lending bybanks. We have also seen efforts by the

Dubai government to curb possiblespeculative activity in the propertymarketincluding an increase in the propertyregistration fee and more recentlystandardisation of sale contracts. Anumber of major developers have alsointroduced aminimumholding to addresspotential speculation.

TheCentralBank’sdecision to imposelending cap on mortgages iswelcomed by the industry. But howeffective will these regulations be inarresting the rise in property priceswhen a bulk of the transactions inthe real estate sector are in cash?

Managing real estate lending related riskis primarily the responsibility of individualbanks; the goal of the Central Bank is toensure that under adverse scenarios thefinancial system functions properly.Central Bank regulations such as a capon banks’ real estate exposure or an LTVlimit ensure the resilience of the bankingsystem and mitigate the impact of anypotential shock on the UAE’s financialinstitutions.

What are themain challenges for theCentral Bank?

The Central Bank identifies threemediumterm challenges. The first is to developa support mechanism for SMes operatingin the UAe. SMes play an important rolein the economy, supplying intermediategoods and services to larger corporates,being a force for innovation and offering

The economy is expected to benefit from investments arising frommegaprojects as well as Dubai’s successful bid for Expo 2020

BY SUneeTi AhUjA-Kohli

groWTh TorEMAIn FIrMIn 2014

i n T e r v i eW

Sultan nasser Al SuwaidiCentral Bank governor




employment opportunities. Furtherdevelopment of the SME sector is vitalto the UAE’s goals of economicdevelopment and diversification. TheCentral Bank believes that all governmententities, federal and local, should takebold and swift actions to support thedevelopment of SMEs. Such supportcould include government guarantees,technical assistance and improving SMEaccess to finance.Thesecondchallenge is thedevelopment

of a pan UAE Debt Market. This challengeis particularly relevant, as new Baselrequirements will require increasedholdings of quality bonds and sukuk. Theabsence of a Dirham yield curve impliesthat banks have little option but to acquirebetter priced instruments frominternational markets, placing the UAEunder spillover risk during crises.Development of a UAE Debt Market will

require the issuance of a public debt lawand thenecessary infrastructure, includingan effective clearing and settlementsystem, custody arrangements, and asmooth and secure link to the UAE FundsTransfer System. Similarly, closecooperation between the Ministry ofFinance, Central Bank, Emirates Securitiesand Commodities Authority and other keystakeholders are required.The third challenge facing the Central

Bank is related to improving bankingservices across the UAE. This relates toimproving the accessibility of the bankingsector for consumers through the usageof new technologies as well as improvingconsumers’ overall satisfaction with thebanking sector. The Central Bank, workingwith UAE banks can act to facilitate suchan improvement in overall bankingservices offered to the UAE consumers.

How does the Central Bank proposetoaddresstheproblemofaccessibilityof finance for small and mediumenterprises (SMEs)?

SMEs are an important sector of the UAEeconomy and through the Central Bank’sliquidity provision to banks, banks areable to lend at a reasonable price.However, supporting SMEs cannot be onlya Central Bank issue, other governmentministries and authorities have a majorrole to play.Currently, the Central Bank is in close

discussion with other governmentagencies to put in place more directmeasures to support lending to SMEs.

Such discussion involves drawing uponthe experiences of initiatives implementedin other jurisdictions to best identify thosemost suitable to the UAE. The CentralBank aims to identify measures that seekto increase accessibility of funding andsupport the viability of SMEs operatingwithin the UAE.

There is a need to spread awarenessabout personal financemanagement.How does the Central Bank proposeto work on this front?

Spreading awareness and educationabout personal finance management iskey regardless of the debt levels amongindividuals in the UAE. The newlyestablished Al Etihad Credit Bureau is amajor move towards assisting individualsfrom taking unnecessary credit riskexposure.Therefore, it is important that the Al

Etihad Credit Bureau forms a solidpartnershipwith theUAEBanks Federationto develop consumer services materialsin their respective websites to provideuseful financial information, on topics suchas inflation, banking, personal finances,investing and consumer protection andinformation to help consumers makeinformed decisions about managing theirpersonal finances.

The UAE aims to become the capitalfor Global Islamic finance. How willthe Central Bank steer this project?

The UAE is well positioned to serve as thecapital for global Islamic finance due toits political stability, well-developedinfrastructureand supportivegovernment.Domestically, the Islamic FinancialServices Industry (IFSI) continues to playa major role in financing nationalinfrastructure, residential properties andcorporate expansion. This will continueas the UAE economy continues its robustexpansion. However, some challengesmay arise which will require concertedefforts among key industry stakeholders.Themost significant challenges are in theareasofstandardisation,riskmanagement,innovation and financial diversification,regulation and supervision, and humanresources. In order to address thesechallenges and to support the UAE’sambitions, the Central Bank can facilitatethe process of implementation anddevelopment of the necessary frameworksthat fall within its mandate.

The UAE financial sector relies on alot of paperwork and cheques fortransactions,whereas the developedfinancialworld has almost doneawaywith it. What are the views of theCentral Bank in this space?

Inmany jurisdictions, use of cheques andpaperwork has been in rapid decline dueto the increasinguseof electronic paymentsystems. In line with such developments,the Central Bank continually strives toimprove the efficiency of its paymentsystems in order to extend better servicesto banking customers in the UAE.With the recent launch of the Direct

Debit System (UAEDDS) for all bankingcustomers in the UAE, the Central Bankis offering banking customers an electronicfacility that helps regularise their recurringpayment transactions in a secureenvironment, thereby reducing paperworkhassles and processing time. In addition,it also assists banks in reducing therequired time and costs in handlingcustomers’ bounced cheques.This direct debit facility is a very

common and popular payment option inmany developed and emerging countries,and it is now available not only to all banksbut also to finance companies andinvestment companies operating in theUAE. The Central Bank stresses theimportance of increasing awareness ofthe UAEDDS, particularly with respect tothe advantages offered to customers.

—[email protected]

The Central Bank believesthat all governmententities, federal andlocal, should take boldand swift actions tosupport the developmentof SMEs. Such supportcould include governmentguarantees, technicalassistance and improvingSME access to finance




nance consumers, corporates,quasi-sovereigns and govern-ment-owned institutions in theemerging markets of the Mid-dle East. Each bank job cre-ated in the UAE has a multi-plier effect on the economy,making banking sector a cata-lyst for the growth of the na-tional economy. Significantly,many of the UAE’s leadingEmirati corporate CEOs, publicsector executives, economictechnocrats and businessmagnates began their careersas commercial bankers, mak-ing UAE banking sector aprominent example of the suc-cess of the Emiratisation poli-cy in the national economy.

The UAE banking sector as-sets have grown tenfold from$49 billion in 1995 to $554 bil-lion (net) by 2013, making itthe largest financial system inMiddle East and North Africa.It is no coincidence that theUAE’s non-oil nominal GDP hasrisen from $49 billion to $229billion by mid-2013, a testa-ment to the exceptional suc-cess of the UAE Governmentpolicy objective to diversifythe national economy. TheUAE’s banking sector has thegreatest financial depth andthemost competitive financialproducts in the Arab world.Banks play a key role in the

payments, settlements, cor-

The UAE bankingsector made atangible andsignificantcontribution to therecovery of thenational economyfrom the falloutof the 2008-09global financialcrisis

ThE UAE has thelargest, most di-verse and sophisti-cated banking sec-tor in the Arab

world, with bank assets now1.3 times its GDP. Banks haveplayed amission critical role inthe emergence of the UAE asthe second largest economy inthe Arab world, with a vibrantnon-oil sector and the hub offinancial services in the Gulf.The spectacular economic

developmentmetrics achievedby the UAE in the past threedecades would not have beenpossible without an equallyspectacular growth in bankingassets, since banks largely fi-

ThE lIfEBlOOD Ofthe nationaleconomy

The banking sector has played a critical role in the emergenceof the UAE as the second largest economy in the Middle East

BY MATEIN KhAlID

CA P S TON E


porate financing, trade financeand capital markets in theUAE. For instance, the UAEbanking system cleared 27.6million cheques with a valueof $306 billion in 2012. Theoutstanding value of letters ofcredit, the bellwether productfor international trade finance,was $32 billion, while forwardendorsements and acceptanc-es were $92.5 billion in mid2013.The UAE banking sector

made a tangible and significantcontribution to the recovery ofthe national economy from thefallout of the 2008-09 globalfinancial crisis. The UAE Gov-ernment’s swift and decisivepolicies enabled UAE banks towithstand the global recessionand credit crunch and resumetheir role as the financial cata-lyst of national economicgrowth. The UAE Ministry ofFinance placed $19 billion insubordinated deposits in theUAE banks, which then pro-

Parameters 31/12/2012 31/12/2013 Change duringthe year (%)

Deposits 1,167.8 1,278.9 9.5

Certificates of Depositheld by Banks 95.1 107.9 13.5

Loans & Advances 1,099.1 1,177.3 7.1

Total Assets 1,791.6 2,025.8 13.1

Capital and Reserves 276.4 268.4 -2.9

UAE BAnks' FinAnCiAl HigHligHts As OF 31/12/2013

Figures in billion dirhams

vided required liquidity to themarket. This liquidity injectionboosted bank capital adequacyratios by 5 per cent, taking thecapital adequacy ratio of theUAE banking system up to 20per cent among the world’shighest.In addition, the UAE Central

Bank set up an additional li-quidity facility mechanism.

Ratios 31/12/2012 31/12/2013

EIBOR/one year (%) 1.63 1.84

Capital AdequacyRatio (%) 21 19.3

Loans & Advances/Deposit Ratio (%) 94 92


These confidence capital andliquidity boosting policies pro-tected the UAE banks from theglobal wholesale money mar-ket funding crisis of 2008-09and enabled the banking sec-tor to finance the nationaleconomy’s recovery from amild recession in 2009 to animpressive 4.5 per cent GDPgrowth rate in 2013-14. It issignificant that most UAEbanks have returned the sub-ordinated deposits of the Min-istry of Finance, and the UAECentral Bank’s liquidity facilitywas used only occasionallyduring the post Lehman glob-al interbank funding moneymarket freeze in 2009.The UAE Central Bank has

acquired a global reputation asa proactive and prudent bankregulator that has insisted thatUAE banks maintain capitaladequacy ratios far in excessof internationally mandatedrequirements set by the Bankof International Settlements inBasel, Switzerland. In 2012,the average Tier One capital ofthe UAE banks was 17.6 percent, one of the highest in theworld, a tribute both to theUAECentral Bank’s prudence and

the inherent financial strengthof the banking sector.UAE banks employed 34,413

professional staff (excludingauxiliary personnel) in mid2013. Significantly, UAE bank-ing professionals have some ofthe highest academic creden-tials and average incomes forexecutives in the UAE econo-my. Economists have estimat-ed that each job in the UAEbanking system creates two tothree jobs in the national econ-omy. A one percent rise in fi-nancial services growth leadsto a 0.67 rise in the broaderUAE employment rate, and aone per cent rise in domesticcredit is correlated with a 0.46per cent rise in non-oil seg-ment of the GDP.The UAE banking sector is

the fourth largest employer ofEmirati professionals after thegovernment, education andtransportation/communica-tions sectors. The UAE finan-cial sector was the third larg-est employer of Emiratiwomen after the governmentand education sectors. Banksponsored training, researchand academic programs havesignificantly upgraded the

professional credentials ofEmirati employees in the UAEfinancial sector.The banks channel savings

of the population and surplus

cash flows of the corporatesector into productive long-term loans, investments andproject finance. In mid 2013,the UAE banking system held$341 billion in customer de-posits and net loans of $319billion. This transformation ofshort term deposit into pro-ductive /investment and proj-ect finance is essential tomaintain and accelerate, eco-nomic growth in the UAE.Banks also play a vital role inrisk management, economicdiversification, the function-ing of the UAE corporatebond/new issue/sukuk mar-kets and finance of the UAE’sinternational trade. The banksalso finance short-term fund-ing needs of corporates, andprovide them with treasuryproducts to enable them tomanage interest rate and for-eign exchange risk that arisesfrom their cross-border busi-ness. Banks have also openedsubsidiaries and even takenownership stakes in banks inthe Arab world and have apresence in major global fi-nancial centres.The international credit rat-

ing agency Moody’s upgradedthe UAE banking sector out-look from negative to stabledue to the significant recoveryin the local real estatemarket,the fall in problem loans andan increase in operating profit-ability. Bank lending in the UAEgrew at 7.1 per cent year onyear in 2013, enabling UAEbanks to generate internalcapital, improve liquidity ratiosand accelerate profit growth.The UAE banking system’s TierOne capital ratio was stellar inJune 2013, liquid assets were30 per cent of total assets andloans to deposit ratio was 93per cent (down from 108 percent in 2008).While UAEbanksmust continue to improve riskmanagement, reduce relatedparty lending exposure andhigh loan and deposit concen-tration risk, the UAE bankingsector has the requisite capital,liquidity, professionalism andscale to act as the catalyst ofthe UAE’s economic growth inthe future.

UAE banksemployed 34,413professionalstaff (excludingauxiliarypersonnel)in mid 2013.Significantly,UAE bankingprofessionalshave some of thehighest academiccredentials andaverage incomesfor executives inthe UAE economy

The Federation’s code of conductenablesmember banks to adoptprinciples and policies that pro-mote professionalism and trust

in the uae banking sector. While thecode of conduct is not a legal documentand does not replace an individual bank’sown policies, it provides values, guidingprinciples and ethical platform to raiseprofessional standards, adopt best prac-tices in banking procedures and promotetrust and transparency in the uae bank-ing sector. The Federation’s code of con-duct emphasises high ethical standards,integrity, due skill, care and diligence asthe foundation of banking activity in theuae. The code emphasises the role ofrisk management, client confidentiality,management of conflicts of interest, ad-herence to all relevant laws and regula-tions, the importance of procedures,processes, systems and control checksin banking operations and the use oftechnology in financial services.an important component of the

code is its emphasis on standards ofmarket conduct, since it addresses re-lationships among banks and the needfor fair competition and accurate infor-mation exchange among memberbanks. The code’s purpose is to pro-mote stability and continued growth ofthe uae banking sector.The success of any banking systems

is based on frank, confidential informa-tion exchanges among member banks.so the code places great importance onstable relationships among memberbanks and high standards of market.The code lays great emphasis on thefair treatment of all bank clients, par-ticularly the elderly and disabled. Trainedstaff must guide clients on suitability ofloan products and services, knowingthat many clients regard the bank’sjudgement as the basis of any purchaseor action decision. Bank must providecustomers with copies of the relevantcontracts or transaction agreements

before the time they take effect. all in-formation exchanged with clients shouldbe fair and not misleading. deposit andsavings rates must be published in anaccessible format and periodically up-dated. client instructions should be ex-ecuted to cause no financial losses. Ifany request cannot be executed due tolegal or regulatory reasons, banks mustnotify their client promptly so this does

not conflict with the relevant law orregulation. all client complaints must beresponded to at the earliest and, whenrequired, independently.The code addresses the role of banks

when dealing with retail clients who ac-cess credit facilities. Banks must takecare to ensure borrower and guarantorare aware of the obligations they are un-dertaking. Banks must be transparent inadvising applicable interest rates, servicecharges and fees onwebsites or on noticeboards in branches. Banksmust also pro-vide clientswho are in financial difficultiessupport to manage their indebtednessand develop a repayment plan beforeresorting to external debt collection orlegal action. Banks should ensure all ad-vertising and promotional material isclear, fair and not misleading.The code of conduct addresses the

importance of training uae national staffin line with national government objec-tives. This can be accomplished viabanking schools, academies, in housetraining and the recruitment of fresh,competent university graduates.

An important componentof the Code is its emphasison standards of marketconduct, since it addressesrelationships among banksand the need for faircompetition and accurateinformation exchangeamong member banks

The UAE Banks Federation’s Code of Conduct, a non-bindingagreement, serves as a guiding light for the sector

encouragIng values andprofessionalism

BY MaTEIn KhalId

code o F conduc T



With 49 banks on board, the Federation’s proposalsand discussions reflect that of the industry

The UAe Banks Federation hasplayed a seminal role in theexponential growthandexpansionof the banking sector since 1982.

Its strategic role encompasses the creationof an advocacy platform for memberbanks, the creation of an Advisory Councilof BankCeOsand10 specialist committeesdedicated to different domains in thefinancial sector, the provision of leadershipin the discussion of industry policy issuesand regulatory liaisonwith theUAeCentralBank.The Federation requested the UAe

Central Bank to invite its member bank’sopinion on mortgage lending via aquestionnaire. This input, in turn, had amajor impact in the UAe Central Bank’sConsumer Mortgage Loan Regulations,issued in 2013. The Federation alsorequested the Central Bank to invitememberbankopinionon themanagementof large exposures and the Federation’sWholesale Banking Committee putforward a proposal to redefine the UAECentral Bank’s policy discussion oncommercial real estate finance. The

Federation’s Islamic Banking Committeehas proposed guidelines to establish aSharia Compliant Governance Unit. TheFederation has contributed to the workinggroups, seminars and workshops on thecreation of the Al etihad Credit Bureau,with its Legal and Consumer BankingCommittee submitting proposals to theMinistry of Finance for consideration.The Federation’s Financial Markets

Committee submitted proposals onliquidity coverage ratios to the UAeCentral Bank for consideration.Meanwhile,the Legal and Consumer BankingCommittees reviewed the Direct DebitSystem and recommended proposals tothe UAe Central Bank for consideration.The Federation continues to play a

crucial role in the infrastructuredevelopment of the interbankmoney andcapital markets of the UAe. Its FinancialMarkets Committee recommendationsresulted in a UAe Central Bank seminaron the Discount Window. The Federationalso submitted a proposal on the nettingof derivatives contracts to the UAe CentralBank for consideration.

TheFederationhas contributed technicalinput to public policy initiatives of the UAeGovernment. A special committee wasformed to discuss the Smart GovernmentInitiative. The Federation’s RiskManagement Committee sent a proposalon Standardisation of IndustryClassification. The Federation’s LegalCommittee submitted a proposal on Realestate Foreclosure to the UAe CentralBank for consideration, as was a proposalto create a National Data Pooling Unitsubmitted by the Risk ManagementCommittee.The CeO Advisory Council approved the

final version of the Federation’s Code ofConduct and the Federation liaised withDubai/ Ras Al Khaimah Courts and theUAe Central Bank to promote, developand regulate the appointment of bankingexperts in legal cases in the UAe courts.The Federation has also enhanced theprofile of the UAe banking systeminternationally via the signing ofmemoranda of understanding with theSouth Korean and Italian bankingfederations.

STEERINGThe UAe BANKING SeCTOR

BY MATeIN KhALID

AC T I V I T I e S



The UBF and the CentralBank are working on aninitiative that includesthe ability to providefinancial services tovarious segments ofthe population throughmobile phones

The term ‘financial inclusion’ veryoften makes people think‘banking for theunder-privileged’.It is actually much more than

that – it is a belief that equates individualfinancial independence to a nation’seconomic potential. Put simply, financialinclusion not only correlates with theaspirations and intrinsic wealth of anynation, but actually supports it.It is a well-known fact that financial

inclusion is about delivering financialservices at affordable costs todisadvantagedand lower-incomesegmentsof society. So it follows that inclusivefinancing will empower society, increaseindividual independence and support aneconomy, aswell as the organisations suchas banks that operate in it.Professor Muhammad Yunus, the Nobel

prize winning founder of Grameen Bankwhich provides micro-credit to millions ofpoor people in Bangladesh, is tomany thepersonification of financial inclusion. Hebelieves that poverty is not created bypoor people. Poverty is an artificialimposition on people. Poorer people areendowedwith the sameunlimited potentialof creativity and energy as any otherhuman being of anywalk of life, anywherein the world. It is a question of removingthe barriers to unleash poorer people’screativity to solve their own problems.The UAE Banks Federation encourages

all of its members to make available thefinancial services they offer to as wide aspectrum of the population as possible.

Obvious rules apply of course, such asaffordability and transparency both ontheir part and on the part of theircustomers.In the UAE we have taken great strides

to improve and enable an environmentripe for financial inclusion, as for instancemost adults in the professional economyhere hold more than one bank depositaccount. But we still need to continue toinnovate and improve technologies thatenable financial inclusion while alsoavoiding risks inherent with potentialmicrofinance options.Wewholeheartedly support high quality

regulatory and supervisory standardswithin the UAE’s banks. We encourageinnovation and continuous assessment ofnew technologies that pave the way forincreased accessibility. Wealso encouragecompetition among the bankingcommunity, since we believe that this willsupport financial inclusion which will feedinto the competitiveness of the nation asa whole.

UAE BANkSEMBrAcEFINANcIAlINclUSION

BY ABdUlAzIz Al GHUrAIrThere are a number of factorsthat drive such an initiative asfinancial inclusion – fairness,transparency and access. Mostof the financially less well off inthe UAE tend to be in remoterparts of the country, and often forthem lack of accessibility is a keydeterrent to knowing about andtaking advantage of the services

available. The UBF and the central Bankare working on an initiative that includesthe ability to provide financial services tovarious segments of the populationthrough mobile devices. A number ofmember banks in the UAE have beenassisting with the design and feasibility ofthis important, potentially lifestylechanging project. Embracing technology,harnessing and cultivating a financiallyaware generation means banks and oursociety canwork together tomakefinancialinclusion a reality throughout the UAE.All of the above is underpinned by

education. If we can stimulate a clearunderstanding of financial literacy amongthe youth of today, we can help avoid thepitfalls seen in recent times, whether it’sthe sub-prime mortgage catastrophe inthe US or the everyday problem of hiddenor misunderstood charges. There is morethan one definition for ‘access’, andeducating all on the benefits of personalfinance if responsibly managed will bodewell for a more inclusive financing societyin the UAE. The banking community in theUAE has an opportunity to lead the way.

AbdulAziz Al Ghurair is the Chairman ofthe UAE Banks Federation

F I N ANc I A l INc lUS I ON


The comfort of carrying outvarious admin tasks at the clickof a button is perhaps the biggestboon of the technological era. So

much that progressive policies ofgovernments, which facilitate the use ofInternet and special platforms for variouschores like payment of taxes, goods andservices, are seen as a perfect matchbetween good policy-making andcitizenry welfare. The latest initiative ofhis highness Shaikh Mohammed binRashid Al Maktoum, Vice-President andPrime Minister of the UAe and Ruler ofDubai, is a step in this direction.The Smart Government initiative is an

advanced step of e-governance that aimsto encourage government andgovernment-related entities to providecreative solutions for round-the-clock,highly efficient and transparent servicesthrough mobile phone applications thatmeet customers’ expectations."The initiative will help transform the

landscape of the UAe into a true digitaleconomy. Through different technologies,the people in the UAe will have accessto secure banking services on the go,making their lives easier and servicesmore accessible and faster," says TiradAl Mahmoud, Chief Executive Officer, AbuDhabi Islamic Bank.The banking industry is adding another

dimension to this initiative by launchingMobile Wallet project to facilitatecontactless payments.Mobile Wallet is a move to go beyond

plastic, whichmeans smartphones wouldbe as good as traditional wallets. It wouldcarry cash, virtually of course, and allowtransactions and payments at NFC-

enabled devices. NFC, or near-fieldcommunications, is a technology similarto Bluetooth that allows mobile phonesto conduct a transaction by tapping thephone on the NFC-enabled terminals.“The UAe Mobile Wallet will allow

residents and tourists to pay forgovernmentservices, completepurchases,send money locally and internationally,pay their bills, receive cash and manymore transactions. All of this will bemanaged through themobile device. Justas online banking brought traditional

banking services to the computer, the UAeMobile Wallet brings these services to themobile phone,” says Alex Thursby, CeO,National Bank of Abu Dhabi.Spearheaded by the UAe Banks

Federation, the idea behind the initiativeis to leverage the deeply entrenchedsmartphone market in the UAe wherethree out of every four people ownsmartphones. The UAe has the highestpenetration of smartphones in the worldat 74 per cent, as per the latest statisticsby the Telecommunications Regulatory

Mobile Wallet, apart of the SmartGovernment Initiative,will facilitate seamlessvirtual transactions

Shayne NelsonChief Executive Officer, Emirates NBD

Tirad Al MahmoudChief Executive Officer, ADIB

BeyONDplASTic

By SUNeeTI AhUJA-KOhlI

F U T UR e MONe y


Authority (TRA).The UAE Banks Federation has

appointed a consultant to chalk out thebasic contours of the project and helproll it out in a year. The groundwork waslaid by a committee on behalf of thebanking sector to translate the SmartGovernment Initiative into reality. Thiscommittee has been working closely withthe Central Bank and other stakeholdersto create the UAE Mobile Wallet sincemid-2013. Banks involved in thecommittee include Abu Dhabi IslamicBank (ADIB), Emirates NBD (ENBD),First Gulf Bank (FGB), National Bank ofAbuDhabi (NBAD),AbuDhabiCommercialBank (ADCB), Commercial Bank of AbuDhabi (CBD), Standard Chartered Bank(SCB), Mashreq, and Dubai Islamic Bank(DIB). The committee, chaired by TiradAl Mahmoud, CEO of ADIB, focuses onthe requirements of the UAE banks toensure that their systems support theMobile Wallet, and that it can be appliedthroughout the economy.The new technology will take the UAE

a notch higher in terms of digitisation— the hallmark of a progressive and

advanced nation. “The mobile wallet willprovide a complete set of financialservices, which will include storing,paying and receiving funds. In addition,a series of complementary services willbe offered that are designed to induceits usage such as loyalty schemes. These

services will be published in details closerto the launch which scheduled in the firsthalf of 2015,” adds Al Mahmoud.The vision is to create an inclusive

mobile wallet, says Shayne Nelson, CEO,Emirates NBD. “We have not yet unveiledall the details of the mobile wallet, butwe can say that this initiative has thepotential to help transform the landscapeof the UAE into a true digital economy.We are excited to be part of this projectthat will be the cornerstone of the nextgeneration of financial services in theUAE. Both smartphones as well asfeature phones are covered by theproject design and scope. For thatpurpose we are evaluating differenttechnologies and solutions.”The concept is very popular in

developed financial markets, where it isexpected to hit 250 million users by theyear end. By initiating this drive, the UAEwill be a part of the league of nationswho have already implemented thetechnology such as Austria, Canada,Poland, US, UK and Japan.

— [email protected]

Alex ThursbyChief Executive Officer, NBAD


typical listing centres like lon-don, Irish or the Kuala lumpurstock exchanges for future is-sues. Also, locally the boursecan play a crucial role in raisingfunds leading up to expo 2020,wherein sukuk is seen as apreferred route. Currently, Ma-laysia is the world’s largestmarket in Islamic finance.Collectively, Malaysia and

the GCC’s annual trade vol-umes have grown significant-ly from $627 million in 1997to over $15 billion in 2013,and account for almost 57 percent of the global Islamic fi-nance assets.“the listing of sukuk is an

indicator that the UAe's Is-lamic finance sector, and par-ticularly Dubai, are now readyto be listed on internationalmarkets. the move will pro-mote the development of an

officer, Noor InvestmentGroup and Chief executive of-ficer, Noor Bank.Interestingly, the UAe is one

of the six countries that willbe the driving force behind thenext big wave in Islamic fi-nance, making it a vital play-er in the future internation-alisation of the Islamic bankingindustry. Presently, the UAeIslamic banking assets areestimated to be around 5 percent of the global pie.the Islamic banking sector

showed strong resilience dur-ing the crisis as the governingprinciples forbids speculativeinvestments, which were amajor concern in the conven-tional banking sector at thetime. “the fundamentals ofthe value proposition of Is-lamic banking are attractiveto customers in general, both

the UAe is keen toadd another jewelto Dubai’s crown tomake it the capitalof $1.7-trillion Is-

lamic economy in the nextthree years — a befitting trib-ute to the emirate that set upthe first Shariah-compliantbank in the 1980s.the work has since begun.

For a start, the Jeddah-basedIslamic Development Bank re-cently listed $1 billion sukuk(Arabic word for certificates)on Nasdaq-Dubai, marking adebut for the UAe. the listinggains prominence in the lightof a recent study by Standardand Poor’s that states sukukissuances will top $100 billionthis year, mainly driven by de-mand from theMiddle east andMalaysia. Nasdaq-Dubai nowoffers a real alternative to

GAINING trACtIoN INIslamIc fInanceThe issuance of $1 billion sukuk on Nasdaq-Dubai brings the

UAE a step closer to its goalsBY SuNeetI AhujA-KohlI

I S l AM I C F I N ANC e

Hussain al QemziGroup Chief executiveofficer, Noor InvestmentGroup and Chief executiveofficer, Noor Bank

active sukuk market in theregion and position Nasdaq-Dubai at the centre of thisactivity,” says hussain AlQemzi, Group Chief executive



Muslims and non Muslims.There is transparency in allunderlying fees, which makescustomers feel safer and lessexploited. The balance sheetsof Islamic banks have consid-erable built-in collateral withhigh capital adequacy ratios.This translates into less risk.It is, therefore, no surprisethat the Islamic banks endedup less impacted by the mis-haps of the financial crisis in2008,” says Mohammed Ab-dulla, Chief Executive Officer,Sharjah Islamic Bank.The steady growth of the top

20 Islamic banks in the worldat about 16 per cent annually

for the last three years, there-fore, is prompting the world’stop financial centres to grab alarger share of the market.During the 2013 World IslamicEconomic Forum in Novemberin London, British Prime Minis-ter David Cameron announcedan ambitious plan. “I want Lon-don to stand alongside Dubaiand Kuala Lumpur as one ofthe great capitals of Islamicfinance anywhere in theworld,”he said in a speech.This year Dubai has the

privilege of hosting the 2014World Islamic Economic Fo-rum, giving its ambitions afurther boost.Statistically, the sector has

shown an impressive rise. Is-lamic banking and financeindustry in the UAE has beengrowing at about 14 per centbetween 2008 and 2012, ef-fectively three times morethan the conventional banks.The emirates has eight Is-

lamic banks that commandmore than $83 billion of theglobal Islamic banking assetsand claim about 17 per centshare of the region’s Islamicbanking assets, cites theWorld Islamic Banking Com-petitiveness Report 2013-14.“The GDP growth in 2012

was about 4.4 per cent wherenominal GDP stood at $383billion. The estimated figureaccording government sourc-es for 2013 is around 4 percent reaching a nominal GDPof $400 billion. Since the fi-nancial sector representsabout 10 per cent of the GDP,the surge in Islamic bankingclearly positions the sector asan important and key con-tributor to the same and isundoubtedly a cornerstone toDubai’s ambition to becomethe ‘global capital of the Is-lamic economy’,” says Dr Ad-nan Chilwan, Chief ExecutiveOfficer, Dubai Islamic Bank.In line with the proposed

plan, a Dubai Islamic EconomyDevelopment Centre will beset up to chalk out a blueprintfor the economy. The centrewill have legal and financialindependence and promoteDubai "to become the globalcapital of Islamic economy".The aim is to build a databaseon Islamic economic activitiesand encourage recourse toarbitration in related disputes.The centre will also be taskedwith conducting studies on theIslamic economy, determiningthe extent of Shariah-compli-

Mohammed AbdullaChief Executive Officer,Sharjah Islamic Bank

Dr Adnan ChilwanChief Executive Officer,Dubai Islamic Bank

ant economic activities on theGDP of Dubai, and how to de-velop them.Interestingly, a drive to de-

velop the Islamic businesssector was also launched lastyear, aiming to attract freshinvestments from the MiddleEast and Southeast Asia. Thegovernment will promote Is-lamic banking and insurance,Islamic financial products andother areas including the ar-bitration of Islamic contractsand the setting of quality stan-dards for halal food.Islamic finance, based on

principles such as ban on in-terest and on pure monetaryspeculation, has grown rap-idly around the world over thelast several years, although itremains much smaller thanconventional finance. Islamicbanks command a roughly 25per cent share of the bankingmarket in the six countries ofthe Gulf Cooperation Council,

according to an estimate byErnst & Young. The popularity,however, is growing. ExplainsAbdulla: “Although IslamicBanking appeals primarily tofollowers of Islam, we havewitnessed a phenomenalgrowth in the number of non-Muslim customers seekingShariah-compliant products.”Talking about the challeng-

es, Dr Chilwan points out thelack of innovation, particu-larly in liquidity managementand working capital financingas the main focus area. “Thesector lacks some of the moreestablished offerings of theconventional banks such asreceivables financing, factor-ing, distributor finance, ven-dor finance and straightfor-ward overdraft facilities. Thereis strong focus in these areasand we are confident thatquality structures abiding bythe principles of Islamic fi-nance will soon see light andplug these gaps.”Standardisation from regu-

latory and governance per-spectives, too, pose a chal-lenge. “Global Islamic financialinstitutions need to come to-gether and look at achievingstandardisation of the regula-tions that govern Islamic fi-nance, as the lack of integrat-ed efforts is limiting its growth.There is a need for balanced,globally accepted regulationsthat drive growth and stemmisuse,” concludes Al Qemzi.




Even though banks in theUAE are directed by the CentralBank to extend a fourth of theirtotal lending capacity (at 24.3per cent) towards this sectorevery year, it is a far cry fromreality. Last year, banks lend-ing to the SMEs stood at ameager 3.85 per cent, expos-ing the vulnerability of the sec-tor. Globally, on an averagebank lending to the SMEsstands at around 14 per cent.It is a double whammy for

the sector as the cost of set-ting up a business in the emir-

or her ability to appropriatelymanage the business intoquestion,” explains Kris Babic-ci, CEO, Commercial BankInternational.In Dubai, SMEs constitute

almost 90 per cent of the totalnumber of businesses andcontribute 42 to 45 per centto the nominal GDP.The Central Bank and the

UAE Banks Federation aremaking efforts to put the sec-tor in focus. In a keynote ad-dress this month, the UAE’sCentral Bank Governor Sultanbin Nasser Al Suwaidi reiter-ated the importance of the sec-tor, and said, “Small and me-dium enterprises are potentialcreators of jobs in emergingmarkets such as the UAE.”The UAE Banks Federation

(UAEBF) too has also been atthe forefront of efforts totransform and develop the lo-cal banking sector. On theirpart, UBF has constituted aSME Committee and has beenrallying support and sugges-

AT60per cent, smalland medium busi-nessesmake a sig-nificant contribu-tion to the nominal

GDP of the UAE, yet the sectoris marred by the lack of finan-cial support and options.Historically, small, medium

and micro enterprises rely onbanks for borrowings, but sincethe financial crisis, the fundinghas dried and local and foreignbanks, private equity lendersand venture capital have be-come increasingly chary.

As lending to small and medium enterprises strained after the crisis,plans are being chalked out to prop up the sector

BY SUNEETI AHUjA-KOHLI

SME S E C TOr

Working together TO

address problems

ates has gone up too. Whilesome banks are ready to lendto existing steady businesshouses, very few will providefacilities to start-ups. “Thehigh rejection rate is a lack ofadequate credit history ofSMEs. Such information is notcollected in the UAE. Thus,banks cannot assess thehealth of the company andlend accordingly. Additionally,banks are reluctant and resistlending to SMEs that have anowner taking on differentbusiness roles. This puts his

Small and mediumenterprisesare potentialcreators of jobs inemerging marketssuch as the UAE

Sultan bin NasserAl Suwaidi

www.nbad.com

Safest Bank inEmerging Marketsand one of world’shighly rated banks

Moody’s S&P Fitch

Aa3 AA- AA-

Global Finance magazine ranked the National Bank of Abu Dhabi (NBAD)as the Safest Bank in Emerging Markets in 2013, the Safest Bank in theMiddle East, and one of the 50 Safest Banks in the world since 2009.These significant recognitions are the result of continuous effortstowards excellence.

Toll Free 800 2211

Winner of Sheikh Khalifa Excellence Award - Diamond Category 2013


tions from member banks toprop up the sector. “The big-gest obstacle for the businessowner continues to be the pre-senting of credible and stan-dard documentation to thefinancial institution. It is onlynatural that both parties (SMEsand banks) attempt to hedgeagainst risks by taking posi-tions that are not beneficial toeither. Bottom line is transpar-ency by the applicant is keyfor paving the way for a solidrelationship with a financialpartner of choice,” notes Mar-tin Roussel, Head of BusinessBanking Division, Abu DhabiCommercial Bank.The Dubai Financial Services

Authority (DFSA) too madeprovisions for small companiesto succor funds through thecapital markets. In 2012, ithad brought the necessarymarket capitalisation for initialpublic offerings (IPOs) from$50 million (Dh183.6 million)to $10 million.Besides this, the setting up

of Al Etihad Credit Bureau willset the stage for greater SMEsupport by providing a frame-work to assess the credit wor-thiness of companies, which inturn would determine theireligibility to funding.In terms of support, the

government has unveiled a

hosts trade finance workshopsfor clients to familiarise themwith the latest trends in inter-national trade and the bankingsolutions that might benefittheir business. ADCB, on theother hand, has active strate-gic partnerships with organi-sations like the Khalifa Fund,Dubai SME, Department ofEconomic Development, etc.CBI, too, supports the idea ofencouraging banks to financestart-ups through loan guar-antee schemes from fundinginitiatives such as Dubai SME,Khalifa Fund for EnterpriseDevelopment, where the in-stitutions share the risk withthe bank.

While the government andother stakeholders prop uptheir support, the onus lies onthe SMEs to reinvent itself andkeep abreast of the latest fi-nance options internationally.


Kris BabicciChief Executive Officer,Commercial BankInternational

Vince CookChief Executive Officer,National Bank of Fujairah

stance, may not have fullknowledge of the trade financeproducts that they have attheir disposal, which is whyNational Bank of Fujairah(NBF) adopts a multidisci-plinary approach towards ser-vicing the needs of clients,regularly bringing in expertsfrom fields ranging from trea-sury to trade to meet its busi-ness banking clients and as-sess their needs.”Blanket borrowing is cited as

another problem area. “Blan-ket borrowing often results inthe customers having surplusloan amounts beyond whatthey need immediately, whichcould end up being utilisedoutside the actual businessrequirement. SMEs shouldmake a three-point checklist:What is the loan amount mybusiness needs currently? AmI ensuring the optimum ben-efit frommy loan? Have I cho-sen the right banking partner?”says Babicci.The financial services indus-

try is also starting to paygreater attention to the needsof the SMEs. Even then, thereis more that banks can do toguide them along in their suc-cess such as conduct roadshows and trade finance work-shops for the SME sector.NBF, for instance, regularly

number of initiatives rangingfrom the Dubai Competitive-ness Office to help speed upregistration of new companies,to the Dubai SME Top 100Awards, which acknowledgesand inspires companies to de-velop their potential of becom-ing world-class enterprises.One of the trenchant chal-

lenges facing the sector is thelack of innovation and exper-tise in the sector. ExplainsVince Cook, Chief ExecutiveOfficer, National Bank of Fu-jairah: “SMEs have yet to de-velop the business expertiseor technical know-how to fur-ther grow their business. Ex-porters and importers, for in-

Martin RousselHead of Business BankingDivision, ADCB

I REDUCED MY MONTHLY FINANCE PAYMENTS.

HOW?I APPROACHED ADIB TO RECEIVE THE RIGHT HELPFUL ADVICE

I REPAID MY LOANS AND CREDIT CARDS WITH ONE FINANCE

I WILL NOW PAY MUCH LESS IN MONTHLY INSTALLMENTS

I HAVE MORE MONEY LEFT TO SAVE AND TO ENJOY MY LIFE

Achieve the right balance for your finances. Join thousands of people who have improved their financial situation through ADIB. With ADIB Al Khair, you can combine your debts into one simple plan and reduce your monthly payments by an average of over 30%. That means more money every month to live a happier and more balanced financial life. Learn more about managing your finances the smart way. Read our Smartmoney booklet or visit smartmoney.adib.ae

Let us help you. Call us at 800 2882 or visit any ADIB branch.

Banking as it should be. adib.ae

Terms and Conditions apply

FREE JOB LOSS PROTECTION!

Pick up a free copy from any ADIB branch.

AL KHAIR LIABILITIES SETTLEMENT

facebook.com/ADIB @ADIBTweets


The stage is set.Al etihad Credit Bureau’s

(AeCB) team has completed theinstallation of an electronic link

with banks and financial institutions, andis operationally ready to launch its services.It will soon allow registration and purchaseof credit reports for UAe residents.A federal government’s initiative, the

credit bureau will maintain a record ofindividuals' and companies' data relatedto the lines of credit, payment timelinesof various services like credit cards, loaninstalments, telephone or other utility bills.Internationally, bureaux process suchfinancial data into credit reports and scoresusing a statistical method that determinesthe capacity of an individual to take oncredit and the likelihood of repaying theborrowed sum.The financial motive is to discourage

increasing dependence on credit andover-leveraging among individuals andcompanies, which is the prime focus ofthe UAe Banks Federation. effectively runcredit bureaux are proven to supportresponsible lending, enhance paymentbehaviour and reduce credit losses frombad or non-performing debts.On these lines, Al Etihad Credit Bureau

too is striving to set a new benchmark inthe accuracy of credit data capture. So far,25 leading financial institutions that controlnearly 96 per cent of the retail creditmarket have shared its data and set stagefor a robust financial system in place.“The existence of a dynamic and

vibrant credit bureau is imperative in anycountry and supports the evolution of thefinancial services industry. Al etihadCredit Bureau is one of the critical

institutions required to have greatertransparency in the financial servicesspace and tomanage consumer behaviourwithin the market place,” says AndreSayegh, CEO, First Gulf Bank.Formation of AeCB points at the

maturing financial landscape of theemirates that fared poorly during thefinancial crisis. A slump in property pricesand liquidity crunch had brought double-digit lending to an abrupt halt in 2009,jolting the economy. As growth returnsand investments pick steam, AECB is astep in the right direction and in manyways points at the UAe’s preparednessto cut the risk of another credit bubble.Notably, the timing is apt and more

pronounced as dubai prepares to hostthe Expo 2020. The event is expected toattract more than 20 million visitors,create 270,000 new jobs, and in turn fuel

demand for credit. “This naturally pavesway to increased business/consumerfinance. At these levels of expansion it iscritical that financial health and economyare protected by embracing technologydesigned to drive down sound credithistory. The credit bureau will harnessthe power and spirit of open-sourcecollaboration between the regulators, theministries and banks, using it forcompetitive advantages while fosteringcustomer confidence and financialstability,” notes Sami Farhat, GeneralManager, Invest Bank PSC.As per rating agency Standard & Poor’s,

low interest rates, returning confidencein the propertymarket andwider economyare supporting borrowing levels. Loangrowth in the UAE is expected to reach10 per cent or slightly more this year, upfrom 9.6 per cent last year.

The official launch of a credit bureau points at the maturingfinancial landscape of the emirates

GUNNING FOr transparency

BY SUneeTI AhUjA-KohLI

sami FarhatGeneral Manager,Invest Bank PSC

andre sayeghChief Executive Officer,First Gulf Bank

Cr Ed I T BUr E AU


Spearheaded by theMinistry of Finance,the project took shape after thoroughbrain-storming sessions by the CentralBank and the UAE Banks Federation. Setup in 2012, the bureau has been workingoffline since July last year to create adatabase. Since January this year, leadingfinancial institutions have supplied creditinformation about their customers,covering their payment behaviour for thepast 24 months including any defaults inthe UAE.The scope of data collection will

eventually increase. “We do believe thedata collection will widen as AECB plansto gradually increase the threshold fromDh15 million to Dh50 million, and thento Dh100 million. AECB will presumablyharmonise with the ministry and the UAECentral Bank, plan to eventually augmentand integrate with the UAE Central BankCredit Bureau, a sensible proposition inthe interest of the economy and thelenders,” says Farhat.Thebankingindustryhaswholeheartedly

supported the initiative. Appreciating themove, Union National Bank’s CEOMohammadNasr Abdeen notes: “Al EtihadCredit Bureau is a key strategic initiative

and a welcome step towards enhancingcredit discipline and transparency in thefinancial system within the country.Establishing such an independent creditbureau would facilitate financial stability,mitigate systemic risk and augmentbuilding a resilient economy.”The bureau will be rolled out in four

phases. The first step, which is already

initiated, involves collection of consumercredit data from a group of financialinstitutions in order to make the lendingprocess more transparent. The secondphase will put together a similar databasefor the commercial sector. The third phasewill rollout value added services for thelenders. Finally, historical data will becompiled and credit scorewill be publishedfor individuals by 2015.“In the long run, it will benefit the

industry, the consumer and the economyimmensely with better credit behaviour,managed interest costs, faster turnaroundtimes, lesser documentation requirementsand greater credit inclusion for allcategories of customers,” adds Sayegh.Banks will be using Al Etihad Credit

Bureau’s data to analyse the creditworthiness of prospective credit card,personal loan, home loan and auto loanapplicants. No longer will the three-month pay slip or credit card statementbe a barometer to measure one’s credithistory.Higher the credit worthiness, the better

the rate of interest for borrowings will be.Keep yours in check!


Mohammad Nasr AbdeenChief Executive Officer,Union National Bank

Trade Services

Well renowned in the region for its trade finance expertise, National Bank of Fujairah is committed to yoursuccess every step of the way. Our dedicated trade services team is ever ready to meet your needs withcustomised solutions in import services, export services and structured trade financing.

So no matter which markets you pursue, rest assured we’re there to enhance your global competitivenessand maximise your trading relationships.

Your reliable business partner


Em i r at i s at i on

see more Emiratis integratedinto the workforce.Emiratisation, a special pro-

gramme introduced by theUaEgovernment to train and pre-pare Emiratis for various jobsin the public and private sector,has served as an answer. Emi-ratisation as a law was firstintroduced in the banking sec-tor in 1996, stipulating that atleast 4 per cent of bank em-ployees had to be Emiratis. thefederal government subse-quently introduced similarrules for the insurance and fi-

since the Emiratisation pro-gramme was introduced, thebanking sector has done wellin integrating the local popula-tion into its workforce. in2013, the sector employed11,679 UaE nationals. Bycomparison, a little more than11,800 Emiratis were em-ployed in 2012. the year 2011was the best with 12,851 UaEnationals on board, whereasin 2010, the number haddipped to 11,721, and stoodat 11,679 in 2009.“We focus on recruiting, de-

“Emiratis, notoil, are thereal wealth ofthe UaE,” saidGeneral shai-

kh mohammed bin Zayed alnahyan, Crown Prince of abuDhabi and Deputy supremeCommander of the UaE armedForces, last year. the mes-sage was loud and clear: whilethe government still supportsthe open-door policy, and ap-preciates the role of expatri-ate population in building thelocal economy, it is keen to

As the government is trying to strike a balance betweenopen-door policy and emiratisation, the banking industry isplaying a lead role

BY sUnEEti ahUja-Kohli

Caring for the

nationals

nance sectors in 2003 and2008, respectively. the scopeof this quota system wasbroadened in late 2010 withthe ministry of labour an-nouncing that Emiratis shouldaccount for no less than 15 percent of total staff at every UaE-based company. recently, ab-sher initiative was announcedto step up the efforts.The banking and financial

industry is themost active androbust sector of the economyand has been a frontrunner inengaging the local population.

Since theEmiratisationprogramme wasintroduced, thebanking sectorhas done well inintegrating thelocal populationinto its workforce.In 2013, thesector employed11,679 UAEnationals.




veloping and providing oppor-tunities to UAE nationals tosupport Emiratisation as awhole. In addition, the AbsherInitiative is one we would liketo support as it promotes in-tegration of UAE nationals intothe private sector workforce.Our team is currently in theprocess of proposing ideas totake part in this very importantinitiative and we will be ableto update shortly,” says PaulTrowbridge, Chief ExecutiveOfficer, United Arab Bank.In United Arab Bank, Emira-

tis constituted 44 per cent ofthe workforce in 2013, upfrom34 per cent in 2008. Like-wise, RAKBANK also boasts ofa healthy ratio of Emiratiworkforce. The bank has 998UAE nationals, constituting41.5 per cent of the totalworkforce, across its branchnetwork and back offices. In2014, it aims to increase thispercentage and hire an addi-tional 120 UAE nationals.“For many years RAKBANK

has supported UAE nationalsin their academic studies andeducation. We actively en-courage UAE national careerdevelopment in financial ser-vices by providing scholar-ships for Emirati students —350 from HCT RAK and 10from American University ofRas Al Khaimah,” says PeterEngland, CEO, RAKBANK.Supporting UAE nationals to

build a strong foundation inthis industry, banks run special

programmes. Explains Waja-hat Husain, Senior ExecutiveVice-President, Group Execu-tive and Head of International,United Bank Ltd, “UBL runs aManagement Trainee Pro-gramme for UAE nationalsthrough which the bank re-cruits young students with allperks and benefits, and regis-ters them for full-time Bankingand Finance Diploma pro-gramme with the EmiratesInstitute for Banking and Fi-nancial Studies. After comple-tion, the recruits are assignedresponsibilities in the branch-es/units. We also remain inconstant contact with Tanmiaand other bodies for hiring oftalented Emiratis and tomain-tain the required diversifica-tion ratio/percentage.”The UBL workforce com-

prises more than 40 per centEmiratis.In the UAE, the local popu-

lation is far outnumbered bythe immigrants at just 11 percent of the total population.In a bid to integrate greaterparticipation of Emiratis intothe workforce, the UAE’sCouncil of Ministers adoptedEmiratisation in the early1990s to apply to both publicand private sectors. While theprogramme has been in placefor more than a decade andresults can be seen in thepublic sector, the private sec-tor is still lagging behind withlocal citizens representingless than one per cent of theprivate sector workforce.As per the latest study by

the government, almost 88per cent of the Emiratis work-

force is in the governmentand semi-government sector,while only 12 per cent makeup the private sector.The official unemployment

rate among Emiratis is ataround 14 per cent amountingto nearly 40,000 nationals.Emiratisation is the top pri-

ority for the Federal NationalCouncil. His Highness ShaikhMohammed bin Rashid Al Mak-toum, Vice-President andPrime Minister of the UAE andRuler of Dubai, has asked theministry to ensure Emiratisa-tion figures increase tenfoldover the next seven years.Federal government’s AbsherInitiative and the year 2013as the year of Emiratisationare a few steps towards thiscampaign.— [email protected]

Peter EnglandChief Executive Officer,RAKBANK

Wajahat HusainSenior ExecutiveVice-President, GroupExecutive and Head ofInternational, UBL

Paul TrowbridgeChief Executive Officer,United Arab Bank (UAB)


29KT Special RepoRTApril 6,, 2014


Anumber of residents andnationals in the uAe are pushedinto a debt trap every year.Figures released by the uAe

Central bank in September last yearthrow light on the dark underbelly of theopulent and hedonistic lifestyle pursuedby many in the emirates. On an average,uAe residents have less than Dh10,000in total bank savings and the debt toincome level has reached an average 108per cent, reveal official figures.Industry experts suggest that 70 per

cent of young emiratis are reported to bein debt in some form. A study conductedby the emirates Foundation in 2012 pointsat the high reliance of emirati youth onborrowings that eventually lead to debt.Appropriately named "emirati Youth inDebt", the study highlights a disturbingpattern of expenditure where a largechunk of their money is spent on diningout, closely followed by clothing andmobile phone calls.The government in 2011 initiated a

Debt Settlement Scheme, wherein aDh10-billion fund was created to helpsettle the bank debt outstandings of uAecitizens. As part of the scheme, signatorybanks are required to waive 50 per centof these loan outstanding while the otherhalf were to be settled through the loanfund, which should eventually be paid ininstalments to the fund from debtor’s

source of income. While it serves as agood start, there is a need to tackle theunderlying problem of financialilliteracy.explains Dinesh Sharma, Consumer

banking Head, menA, Citi: “Financialliteracy campaign can be effective if takenup at grassroots levels, and building anecosystem for responsible finance andfinancial education at an early stage canprove beneficial. While debt settlementfund can provide a short-term fix, a long-term solution to sound financing can onlycome from financial literacy.”For the last 10 years, Citi has forged

partnerships with academic institutions

such as Higher Colleges of Technology,university of Dubai, Abu Dhabi university,Sharjah Women’s College, Ittihaduniversity and emirates Institute ofbanking and Financial Studies, whichresulted in the training of hundreds of localstudents and women entrepreneurs.The uAe banks Federation on its part

has launched the Code of Conduct, whichstipulates transparency. “The Code ofConduct entails banks to be fullytransparent with customers. This is tobenefit customers and is another steptowards creating financial stability. It isimperative to ingrain the principles ofsound financial discipline across allsegments of clients. understanding clientneeds and explaining the risks/ rewardpayoff should be firmly emphasised to all,”says Farhad Irani, Head of retail bankingGroup, mashreq.However, the onus lies with the

individuals too for self-learning andunderstanding the value of money. everyindividual, irrespective of age must takethe responsibility to educate themselvesand being financially literate for takingwell-informed decisions.make every dirham count and spend

wisely.— [email protected]

F I n AnC I A l l I T e r A C Y

Dinesh SharmaConsumer banking Head, menA, Citi

Farhad IraniHead of retail banking Group, mashreq

Used to an opulent lifestyle, a number of UAE residents strugglewith high personal debt

be mInDFul OF YOurSpenDIng habItS

Let’S Start wIth the baSIcSHere are some cardinal rules of personal finance for a healthy wallet:

Pay yourself first:1. before you start spending on monthly expenditures orshopping,make it a point to pay yourself first. It is a good start towards savings.Gradually, build up a contingency fund that has at least three months of yourmonthly income.Loan to income ratio:2. Financial advisors suggest no more than one-third ofthe monthly income should be used for paying of loans/credit.Pay off your credit cards:3. Credit cards charge very high rate of interest,make it a point to pay off the bills before the due date.

We are honoured to have received this accolade from The Bankermagazine, whose annual awards are recognised as the definitive guideto performance, strength and achievement within the banking sector.This prestigious title is the latest in a winning year for First Gulf Bankand validates the progress we are making in adding value and serviceexcellence for our customers and stakeholders.

www.fgb.ae

"Bank of the Year,United Arab Emirates"

2013

First Gulf Bank wins

uae banks federation

Documents

national banks

supplements editor

work hand

national economy

healthy growth

credit growth

secondlargest economy

thecentral bank