UAE banks must shed diffidence

The business of banks is to lend money to companies and consumers for investment and to purchase goods and services. However, with their balance sheets damaged by the international financial crisis, banks in the UAE and across the world have become very conservative about extending mortgages and trade credit. This is hindering economic recovery.

Now the UAE Central Bank is working on a plan to regulate the credit and mortgage markets more effectively. Even though the liquidity situation in the country is improving, loan growth still lags. The Bank is concerned that the low lending and high financing costs have resulted in a slowdown in the mortgage sector, which is hampering recovery in the real estate sector.

At the height of the financial crisis, the UAE Government stepped in to support the banks. Now the banks need to do their part and responsibly extend the credit companies and consumers need to keep the economy growing.