Mashreq raises concern over lending policies

Mashreq bank has voiced concerns over aggressive unsecured lending policies by banks to small and medium enterprises and nationals and urged the UAE Central Bank to crack down on them.

Douglas Beckett, newly-appointed head of retail banking, said unsecured personal or small business loans of up to Dh2 million were being offered.

And he warned that many borrowers would be unable to repay the cash.

"Regrettably we have to accept the fact as some banks are promoting lending packages for nationals of up to Dh2m to be repaid over 165 months," he added. "This fuels competition among banks and the Central Bank should intervene to regulate these practices.

"The limit of Dh250,000 for consumer lending is still in force. However, the draft regulation by the Central Bank to expand lending facilities has ignored important areas such as lending for small businesses.

"A Dh2m loan for a small business is a huge amount that many will fail to repay. The Central Bank should regulate this process.

"Fundamentals in the UAE are very strong, especially the population growth rate and the increasing spending abilities of this population. This is a good environment for growth in retail banking services," he said.

But he said banks had a social obligation to lend responsibly and not allow customers to take out loans that they could not pay back.

"This is not as easy as it looks because we do not know the full extent of our customers' borrowing from other banks due to the lack of a fully operational credit rating system in the UAE.

"There should be a compulsory submission from all banks to establish the financial position of customers. Again, the Central Bank should drive forward the credit bureau initiative to make it compulsory for all banks to submit full information about the credit positions of their clients. This will fill a critical gap in the UAE banking industry."

Beckett said the level of loan defaults at Mashreq Bank amounted to less than two per cent of the total credit portfolio.

"This is a historical low level because we have strict underwriting criteria so we are able to manage different situations and preserve the profitability of the bank," Beckett said.

He highlighted the growth of the credit card business in the country, which he said was expanding at around 30 per cent per year.

"This growth is fuelling competition among banks to offer new credit card products," he said.

Mashreq to expand network in UAE and Egypt

Mashreq plans to open 10 new branches in the UAE and 11 in Egypt over the next four months as part of its organic expansion strategy, Douglas Beckett, head of retail banking, said.

"Mashreq is implementing a plan to open 17 new branches in the UAE this year. We have already opened seven and our branch network has grown to 54. By the end of 2008 we will increase the number of local branches to 64 – one of the largest networks in the country. We hope to increase our total number of branches in Egypt to 25 subject to regulatory approvals. We have also applied for a licence in Kuwait. "Apart from the new branches we are expanding our call centre and improving our internet banking functionality. We will launch our mobile banking service by mid-September and this new channel will have the same functionality as internet banking."