Personal debt in the UAE is on the rise, with total domestic lending to UAE residents crossing Dh332 billion in 2015, according to findings by UAE-based financial comparison website Souqalmal.com shared with Gulf News.
In its latest ranking analysing the most viewed banking products, personal loans made up for more than 33 per cent of all visits - almost a third of all visits on the site in 2015. The number of visits also more than doubled compared to 2014. This was closely followed by credit cards, savings accounts and deposits, and insurance.
Data from the UAE Central bank show that total loans to UAE residents grew by more than 5 per cent in year-on-year as of November 2015. "Within personal loans, non-salary transfer loans emerged as the most popular type," says Ambareen Musa, CEO and founder of Souqalmal.com.
"This could be attributed partly to customers with existing salary transfer loans or those who have other obligations and cannot commit their salary to a certain bank. The other reason could be the customers who get their salaries in cash or by cheques as well as those who get paid on a commission basis, and therefore cannot show a regular salary transfer in their bank statements.”
With visits on Souqalmal.com’s credit card pages increasing by 241 per cent in 2015, credit cards became the second most-visited product on the website, constituting 22 per cent of total visits recorded in the past year.
Credit card usage in the UAE has also increased over the last few years, according to the UAE Central Bank, with point-of-sale transactions growing at a compound annual growth rate of 24 per cent since 2010.
Credit cards are within the reach of most UAE residents, where the site’s data shows that out of the 245 credit cards listed on the website, 67 per cent have a minimum salary requirement of Dh10,000 or lower. More than half of all existing credit cards in the market also come at zero annual fee, which makes owning one even more affordable.
Within credit cards, cashback is the most sought after reward based on visits for each card category on Souqalmal.com. Approximately one third of all cards in the UAE offer cashback as a feature.
In terms of popularity, this is closely followed by cinema rewards and air miles. While the former offers cardholders ‘buy 1 get 1 free’ movie tickets, discounts on popcorn, beverages and such, air miles-linked credit cards allow users to convert their card spend into flight tickets. About 46 per cent of all cards in the UAE offer air miles either directly or indirectly in the form of points that can be converted to air miles, and 27 per cent offer cinema rewards as part of their main features.
Savings accounts and fixed deposits
Accounts that offer returns in terms of interest or profit, became the third most popular product category on Souqalmal.com. UAE residents are becoming more conscious about maximising the returns on their savings and are thus turning to savings accounts and fixed deposits.
Out of the 294 accounts listed on Souqalmal.com, 148 are fixed term deposits, 63 are savings accounts and 53 are current accounts. Savings accounts are a feasible choice for the masses with minimum balance requirements starting at only Dh3,000. Fixed deposits are affordable too with minimum deposit requirements ranging from Dh5,000-10,000.
“In terms of returns, the average annual return on savings accounts in the UAE is 0.60 pe rcent and just under 1 per cent on fixed term deposits of varying maturities. Overall, the accounts category constituted 14 per cent of all visits in 2015, almost double that of 2014,” says Musa.
Car and health insurance
Another interesting trend that became apparent in 2015 was a substantial increase in the number of people looking for insurance products online. Visits on Souqalmal.com’s insurance pages formed 13 per cent of overall visits on the site. Insurance category visits also recorded the maximum increase in the last year, growing fivefold in 2015.
A further analysis of this data revealed that car insurance and health insurance made up over 80 per cent of visits across various insurance categories. The increase in health insurance visits can be attributed to the mandatory health insurance law introduced by the Dubai Health Authority last year.
The share of visits on Souqalmal.com’s mortgage pages saw a decline of 3 per cent, and there was a relatively lower increase in visits for mortgages when compared to other products. This is likely due to the real estate market stabilising in the UAE in 2015.
With the new mortgage regulations and the revised cap on loan-to-value being introduced in late 2013, it is not a surprise that mortgages were not the most popular personal finance product for UAE residents.