Despite pressure from high interest rates, demand for bank credit in the UAE is still on the rise, driven by economic stability and robust investments, according to the central bank’s (CBUAE) latest 2Q 2024 credit sentiment survey (pdf). The results — based on responses from 295 senior credit officers at licensed financial institutions in Abu Dhabi, Dubai and the northern emirates — signal sustained growth in credit activity across all segments and sectors, with large firms and government-related entities (GREs) leading the way.

(** Tap or click the headline above to read this story with all of the links to our background and outside sources.)

Behind the growth: Key demand drivers included improving economic conditions, working capital needs, and increased government spending, according to the central bank. While high interest rates continue to “weigh on demand,” their impact has notably fallen compared to earlier periods.

Business loan demand saw an increase in 2Q, with 53.8% of respondents reporting a growth in demand, while only 4.4% saw a dip. While northern emirates showed the strongest growth, demand remained solid across the nation.

Industry-wide, demand surged above long-term averages. GREs and large firms were behind the jump, with the construction sector posting the highest growth, followed by manufacturing, property development, and retail firms

Looking ahead, business credit demand is expected to maintain its upward momentum over the next three months, particularly from SMEs, large companies, and GREs. The CBUAE sees credit appetite remaining strong across these sectors in 3Q 2024.

Personal loan demand jumped in 2Q 2024, with northern emirates once again leading the growth. However, despite recorded growth, 2Q net personal credit figures were lower than comparable figures for 1Q. Improved economic conditions and rising incomes are expected to drive future demand, especially for housing, personal, and car facilities as well as credit cards.

Lenders rejected more personal loan applications this quarter. This increase came on the back of a rise in rejected car loans offsetting a decline in rejections for housing loans and credit card applications.

Financial ramped up lending in 2Q, fueled by the UAE’s positive economic outlook, solid “quality of banks’ asset portfolios, and competition from other banks and financial institutions,” the CBUAE said.

The cost of funds and changes in risk tolerance saw some respondents saying their institutions had bumped up pricing on credit facilities to reflect what some saw as higher risk.

Tags: