Recent data issued by the Central Bank showed that the banks focused about 95.4% of their financing during the first five months of this year in the local market, at a value of 18.8 billion dirhams, pumped into different sectors.
According to these data, the total loans granted during the period from the end of December 2019 to the end of last May amounted to 19.7 billion dirhams, of which 18.8 billion dirhams were acquired by the local market, while loans worth 900 million dirhams went to the financing of non-residents in the country.
Total credit
The data revealed that domestic credit increased from one trillion and 592 billion and 600 million dirhams to one trillion and 611 billion and 400 million dirhams, an increase of 18.8 billion dirhams, and a growth of 1.2% over a five-month period.
As for credit directed to non-residents, at the end of last May, it recorded 166 billion and 900 million dirhams, compared to 166 billion dirhams at the end of December 2019, an increase of 900 million dirhams only.
Lending growth
The figures indicated the growth of lending directed to the private sector, to rise from one trillion and 134 billion and 600 million dirhams at the end of December 2019 to one trillion and 139 billion and 800 million dirhams at the end of May 2020, an increase of 5.2 billion dirhams and a growth rate of 0.5%.
Also, the lending directed to the industrial and commercial sectors increased to 815.7 billion dirhams, compared to 802.2 billion dirhams at the end of December, an increase of 13.5 billion dirhams.
Hedge and sift
In turn, the banking expert, Youssef Ahmed, said that the global economic conditions related to the repercussions of the emerging Corona Virus (Covid 19) raised the risks in external financing, and even the local market, as there is great hedging and scrutiny before the loans are granted.
He added that banks in the UAE are accustomed to granting loans and banking facilities to companies and external entities with a good reputation and high rating, but since the beginning of this year, and with the spread of the "Corona" virus globally, and every country closing to itself and its economy, it is natural that there will be a decline in Lending to non-residents, concentrating support and financing for the local market.
He continued: «Since the beginning of the crisis, the Central Bank’s directives were clear that it is necessary to support the local market and government and private companies, especially small and medium-sized companies.
Strong legislation
In the same context, the banking expert, Mustafa Al-Rikabi, said that lending to non-resident entities is usually linked to the stability of political and economic conditions, and this was not achieved since the beginning of 2020 due to the Corona virus. Therefore, the banks focused on the interior first to support local companies and institutions, which are The first in these circumstances.
He added: “The other reason is the high risk in external lending, because the vision is not completely clear regarding life returning to normal.” He pointed out that the banking sector in the UAE has extensive experience in dealing with crises, and it has strong legislation that protects its assets and maintains The rights of depositors and government funds. It is natural for banks ’risk departments to take into account all this data, and to reduce the granting of loans abroad and focus them on the local issue.
Personal loans
Individual lending (personal loans) declined to 324.1 billion dirhams, compared to 332.4 billion dirhams at the end of December 2019, a decrease of 8.3 billion dirhams and a change of "negative 2.5%".
High lending directed to the industrial and commercial sectors.