Best use of your pay or salary
At ADIB, the salary advance product will extend short-term loans in 5 minutes. This is 'Yusr's essence', says a top official. Image Credit: Gulf News Archives

Dubai: Will salary advances turn out to be the next major initiative from UAE banks? If that’s the case, they could see some heavy interest from their salaried account holders, because the times are such, when more residents are finding it difficult to dip into their incomes until the end of the month against a general increase in inflation-led cost of living.

A handful of the big banks are thinking of getting into salary advances, while UAE’s newly launched digital-only banks with a heavy focus on consumer banking could also be likely entrants.

Abu Dhabi heavyweight ADIB is definitely not waiting for more evidence of likely end-user interest, and launched the ‘Yusr’, where its salaried account holders can get an advance on their salaries within five minutes.

A top official at ADIB says the product offers a timely option for those short of funds by month-end.

Samih Awadalla, acting Global Head of Retail Banking Group at ADIB. Image Credit: Supplied

Yusr is “developed in response to customers’ needs who usually pay such expenses through either card payment plans or seek alternative financial support”, said Samih Awadalla, acting Global Head of Retail Banking Group at ADIB. “We observed that people sometimes face difficulty in bridging the gaps for their regular payments prior to receiving their regular monthly salary.”

Sources in the banking sector agree with the contention, saying that if such salary advances - or ‘payday lending’ as is known in the West - can provide a less expensive option than using the credit card, it would catch on with consumers. “Credit card rates on remaining balance are going up, which is why a competitively priced salary advance product could be quite a winner in the UAE and other Gulf markets,” said a financial services consultant.

Banks do have the cushion

Banking industry sources say that such lending needn’t carry a heavy risk element for banks, even with expats making up a sizeable part of the consumer base. Banks can secure themselves by lending only to those whose salary is credited to the accounts with them.

In ADIB’s case, the user should have been with the bank for a minimum three months. “ADIB has a unique customer base wherein UAE nationals form the majority, but we also have a large number of expatriate customers,” said Awadalla. “This product is offered to all customers who are transferring their salaries to ADIB and looking for advance to keep up with their commitments.

“ADIB has a customer base where the majority are active on our digital platform – ADIB Mobile App. We have also witnessed a growth in the number of new customers who want to bank with ADIB. So far, we have seen excellent responses from our customers after the launch of Yusr, and the expectation is to double those numbers in the coming weeks aligning with our launch plan.”

Upward limit

While the advance is made in a flat five minutes, there is an upper limit - Dh50,000 - on the amount that the account holder can take out with Yusr. All of the processes are done through the ADIB app.

Ask - and pay back

“Customers can apply once at any time of the month and repay the full amount on upcoming salary transferred into their account with ADIB,” the official added. “Post the payment of the full amount, customers can avail of an advance for the next month immediately after clearing the due amount of the previous salary advance.”

ADIB’s Yusr is based on Sharia

> The profit amount calculation depends on the finance amount and the number of days of the transaction, which may vary from customer to customer.

> According to ADIB, the Yusr salary advance feature is in line with Sharia principles under ‘Murabaha’ as Islamic banks are not allowed to offer an overdraft facility.

> The customer pays the profit amount for the actual period of the salary advance, which is defined in the Murabaha contract.