85% of UAE residents in deep debt

A huge majority of UAE residents are entangled in a debt trap even as the Central Bank reports a spurt in the number of bounced cheques this year, a study by a UAE-based financial consultancy revealed. The study, the first of its kind held in the UAE, also revealed that 85 per cent of those who responded to a survey are heavily indebted, with the average individual debt at around Dh500,000, reported Khaleej Times. The study by the Dubai-based debt management and credit counselling agency ISDM suggests that 75 per cent of the debt-laden residents are men and the rest women. In Dubai, in terms of total debt by nationality, residents from India (17 per cent) and Philippines (25 per cent) rank the highest, followed by Pakistan and South Africa, while Emiratis accounted for three per cent. The study covered a cross-section of mostly salaried category, earning between Dh4,000 and Dh70,000 a month, said Yohannes Mazeingia, Managing Director of ISDM. He said the average individual debt of Dh500,000 might appear huge. “But when you consider the combined load of a couple of personal loans and several credit card debts plus interests and other hidden charges, the total individual liability cannot be less,” he said. “This is a serious issue that needs to be addressed before it goes out of hand,” said Mazeingia, whose firm currently services more than 3,000 clients. After a period of slower credit availability, easy credit options are again chasing gullible customers with most banks in a race to lure as many credit card users as possible. Banks in the UAE charge exorbitantly high interest rates which, combined with “other hidden charges”, will cross 24 per cent, which Mazeingia believes, is “one of the highest in the world”. “The lack of stringent credit ratings polices and the culture of consumerism have lead to huge bad debts,” he said. Mazeingia said banks are to be blamed for creating this predicament. “Most banks offer unsuspecting customers easy and lavish credit by way of personal loans, credit cards, without any due diligence,” he said. In the case of default, banks can put pressure on the customer with a threat to send them to jail or impose a travel ban.