Banks block financing for firms delaying Emirati pension payments

In a report submitted by Al Etihad Credit Bureau (AECB) to the General Pension and Social Security Authority (GPSSA) and the Emirati Talent Competitiveness Council (Nafis), some private sector companies and institutions were flagged for failing to pay pension and social security contributions for their Emirati employees.

As part of the framework to safeguard the rights of Emirati employees working in the private sector, any outstanding monthly contributions owed by companies to the pension and social security system are now included in their credit reports in detail. This results in banks rejecting financing requests until the overdue amounts are settled.

According to the credit report of one private company, which was shared with the relevant authorities, arrears amounting to Dh900 were recorded due to insufficient funds in its account linked to the direct debit system for the payment of monthly pension and social security contributions for one of its Emirati employees.

Banks have notified several private company owners that their financing requests will be rejected and their companies will be subject to a “block” if there are delays in paying monthly pension and social security contributions for Emirati employees, even if the outstanding amounts are relatively small.

Private company administrations clarified that these contributions are automatically deducted from their accounts each month through the direct debit system. However, in cases where an account balance is insufficient, the missed deduction immediately appears in the company’s credit report and blocks any financing transactions with banks.

Bank reports confirmed that private sector companies complying with Nafis and GPSSA regulations continue to receive banking facilities without restrictions. The reports added: “Banks do not reject financing for companies whose credit reports show arrears related to pension and social security contributions for Emirati employees; rather, the transactions are suspended until the overdue amounts are cleared. Once settled, the credit report is immediately updated by AECB.”

The reports further explained: “Pension and social security contributions are deducted via direct debit. If the deduction fails, it instantly appears in the company’s credit report. Banks treat failed deductions as bounced cheques, meaning such instances are recorded in the credit history.”

They added: “At times, employers may not realize that their account lacks sufficient funds, but this is immediately reflected in the report, leading to a block on their company. Consequently, all financing transactions with banks—whether commercial loans, car financing, or otherwise—are suspended.”

A report submitted to Nafis and GPSSA also revealed that failed direct debits negatively impact the credit profile of both companies and individuals, lowering their credit score. Conversely, consistent and timely payments via direct debit contribute to improving credit ratings.

In November of last year, the GPSSA signed a Memorandum of Understanding with AECB, which explicitly stated that the MoU aims to “strengthen cooperation and partnership between the two entities in the field of data exchange, and leverage advanced credit data products to assess the financial soundness and stability of private sector companies in fulfilling their pension contribution obligations—both present and future.”