While increasing interest rates did impact the loan appetite of individuals in the UAE, this was more than offset by a strong financial and property market, as well as improvement in incomes. Accordingly, there was a strong increase in loan demand and as well as a growing inclination of financial institutions to extend credit, said the latest Credit Sentiment Survey released by the UAE Central Bank.
Along with the economic and real estate factors, customers’ sales and fixed asset investment were cited as key contributors to the growth in credit demand.
“Credit sentiment for the quarter ahead remains strong, with survey respondents maintaining optimistic expectations for further demand growth while financial institutions maintain solid credit appetite,” the report said.
The strong loan demand was seen in both categories – individuals, and corporates and small businesses.
Individual lending
In terms of individual lending, the “net balance measure” hit its highest level since June 2014, the survey said, and growth in demand for personal loans was registered across all loan categories, with solid demand for housing-related loans (such as owner-occupier and investment), credit cards and car loans. (Net balance is calculated as the weighted percentage of respondents reporting an increase in demand for loans minus the weighted percentage of respondents reporting a decrease in demand for loans.)
“Looking ahead to the next quarter, banks and finance companies expect credit demand and supply conditions to remain strong for personal lending,” the Central Bank said in the report.
Business lending
Lending to corporates and small businesses remained strong, albeit a little slower than the previous quarter. Increased demand was widespread among the different loan segments, though the pace of growth was relatively modest for non-residents.
Growth in the retail and wholesale trade sector, followed by manufacturing and property development, played a vital role in determining credit demand. Solid demand for credit was strengthened by customers’ sales, the economic and property market outlook, customers’ fixed asset investment, and the change in government expenditure.
“The outlook for the September quarter remains positive with survey respondents anticipating a solid increase in credit demand and strong willingness to lend,” the survey said.
According to survey results, 47.9 per cent of respondents reported no change, 47.9 per cent reported a moderate increase in demand, while only 4.3 per cent of respondents reported a decrease in demand.
There was a solid increase in credit appetite and demand for business loans across all emirates, with Dubai recording the strongest growth rate, the survey showed.
