Credit demand in the UAE upheld robust growth in 1Q 2025, driven by an improved economic outlook and favorable investment climate, according to the Central Bank of the UAE’s (CBUAE) 1Q 2025 Credit Sentiment Survey (pdf). The survey, based on 290 responses from senior credit officers at licensed financial institutions across Abu Dhabi, Dubai, and the Northern Emirates, highlights rising credit activity across all emirates and sectors.

Business loan demand gained more momentum in 1Q, with 58.3% of respondents reporting higher demand, while only 4.5% noted a decline. Abu Dhabi saw the strongest growth, with demand rising moderately across all emirates. The growth was fueled by “robust economic conditions, working capital needs, and solid investment,” according to the survey. Interest rates were also a key driver of credit demand since they were cut in December.

All sectors witnessed an increase in loan demand, with large firms taking the lead, followed by SMEs and government-related entities (GREs). The retail and wholesale trade saw the highest growth rate, followed by construction, manufacturing, property development, and electricity, gas & water sectors.

Looking ahead, business credit demand is expected to continue to see gains over 2Q 2025, led by large firms. “All economic sectors are expected to see higher demand growth, with the most significant increases in construction, retail and wholesale trade, manufacturing, and property development,” according to the survey.

Personal loan demand also rose during 1Q, with Dubai taking the lead, boosted by strong economic conditions, rising incomes and a favorable interest rate influence. Housing loans, credit cards and personal loans saw the highest demand. “Financial institutions’ willingness to extend personal loans has been primarily driven by a positive economic outlook, alongside improving bank asset quality and stable borrower creditworthiness,” according to the survey.

Positive outlook: Financial institutions anticipate further growth in loan demand, with robust economic conditions and rising incomes expected to support future demand, particularly for credit cards, personal, housing, and car loans.

Premiums on riskier loans, maximum LTV/LTI ratios, and non-interest fees & charges for personal loans rose during the quarter, while the spread of loan rates over the cost of funds narrowed marginally.

The share of rejected personal loan applications also saw a marginal increase during the quarter, as greater rejection rates in credit card applications and car loans outweighed the drop in housing-related loan rejections. Despite this, financial institutions showed an increased appetite for lending, supported by a strong economic outlook, improved asset quality, and stable borrower creditworthiness.

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