STOCK Central Bank of the UAE  CBUAE
Banks and finance companies expect credit conditions to remain robust for the personal lending segment, the Central Bank's survey said. Image Credit: Supplied

Consumer appetite for credit instruments, including a solid demand for credit cards and Islamic loans, was prevalent in households across the UAE during the last quarter of 2022. Moreover, growth in demand for personal loans was recorded across most loan categories, except for non-housing investment, the UAE Central Bank said in its quarterly Credit Sentiment Survey.

The survey revealed continued growth in loan demand in the corporate sectors. “Factors such as customers’ sales, fixed asset investment, the economic, financial and housing market outlooks, and change in income continue to play a key role in determining credit demand,” according to the survey.

Results indicated that while there was growth in consumer appetite for credit in the December quarter, the pace of growth slowed noticeably since mid-2022, the apex bank said. Looking ahead to the next quarter, banks and finance companies expect credit conditions to remain robust for the personal lending segment, stated the report.

Demand for personal borrowing to stay high

“The increase in loan demand stemmed from moderate growth across all emirates during the quarter, most significantly in Dubai,” stated the report.

According to survey respondents, the positive effects of improved housing and financial market outlooks and changes in income outweighed the adverse effects of seasonal influences, competition from other banks and higher interest rates in determining credit demand over the past three months. Respondents in the survey are senior credit officers from banks and financial institutions in the UAE.

On the other hand, the main factors responsible for driving the change in banks and finance companies’ appetite to extend personal loans in the December quarter were the quality of banks’ asset portfolios, the difference in the creditworthiness of prospective borrowers and risk tolerance, and the overall economic outlook, the survey respondents said.

Corporate sector loans

In terms of lending to corporates and small businesses, the December data highlighted a robust increase in business loan demand, with solid growth across all emirates.

“Increased demand was strong across all loan categories and was most prominent among large firms, locals, and government-related entities,” the report revealed. Retail and wholesale trade sectors saw the most robust growth during this quarter.

“Loan demand for manufacturing, property development, construction, transport, storage and communications was also relatively strong,” it added. The UAE’s apex bank said loan demand was strengthened by customers’ sales, fixed asset investment, and the economic outlook.

In terms of credit availability, an increase in banks and finance companies’ willingness to extend business loans was observed, supported by improving asset quality and economic outlook and a change in tolerance for risk and creditworthiness of prospective borrowers.

“The outlook for the March quarter remains positive, with survey results suggesting a strong increase in credit demand and willingness to lend,” stated the report.