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22 February 2024

Banks in GCC open to receivables as security

Banks in the region have so far been accepting property and personal guarantees when it comes to lending. (EB FILE)

By Shveta Pathak

Banks in the GCC are gradually opening up to accepting trade receivables as a security against lending, a senior executive from a credit insurance company told Emirates Business.

According to industry sources some foreign banks are thinking of introducing this facility in the market.

He said the attitude of corporates in the region to coming forward with their financial details has undergone a significant change in the last one year and companies are much flexible to share the details as they want to convey their credit worthiness to their customers.

Mahan Bolourchi, head of Risk Management, Euler Hermes Credit Insurance, said: "Today, I can say that every month we are receiving 250 balance sheets from the GCC markets."

Banks in the region have so far been accepting property and personal guarantees when it comes to lending.

The new trend suits the present economic environment when many of the businesses have build up huge trade receivables.

The banks, which have so far been used to accepting property, a personal guarantee or even post-dated cheques only, are expected to grow more open to view trade receivables as a security in 2010, said Anil Berry, Regional Manager for Euler Hermes.

"Trade receivables can be the biggest security. For banks in this region, it is still not very common to accept them as a security. Compared to Europe, where over 70 per cent of the banks would accept them, in this region, the percentage is less than five. However, UAE banks are gradually opening up to the idea," said Berry.

Euler Hermes, which conducts thorough credit checks before providing credit risk insurance, does it thorough various methods including gathering financial data about the concerned firms.

"We have multi sourcing solutions, tailor-made reports with us, agencies which are working from GCC who conduct search for us. Based on our requirements, we get the data and conduct our analysis; our credit analysts are proactively calling up and asking companies for financials," said Bolourchi.


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