The total liability from bounced cheques in the UAE dropped by a quarter in the first four months of the year in a sign that the bad debt crisis may be easing.
But despite the decline to Dh18.6 billion (US$5.03bn) in the first four months of the year from Dh24.8bn in the same period last year, the actual number of dishonoured cheques increased, Central Bank data showed.
The number of returned cheques rose by 8 per cent from 544,196 in the first four months of last year to 588,570 in the same period this year.
"Consumers hold the key to any economic recovery," said Tudor Allin-Khan, the chief economist at HC Brokerage. "If there's a reduction in defaults and an improvement in income and spending power, that indicates the real economy is in better health."
Late payments and defaults on debt shot up during the global financial crisis as a wave of job losses left many unable to pay personal loans, mortgages and housing rent.
A pick-up in economic activity, improved job prospects and a decline in rents have helped to bolster consumer confidence, contributing to a gradual fall in the amount of defaults, say economists.
Cayan, a Dubai property developer, has seen a reduction in the amount of tenants defaulting on rent instalments.
"The average amount of bounced cheques we have is no more than 10 per cent," said Kareem Derbas, a partner and chief executive of Cayan. "It has decreased. The main reason for that is because the rental has come down and people are now spreading the money they pay over a year."
With rent payments accounting for a significant portion of cheques written, the move towards tenants paying for their rent in quarterly or monthly instalments rather than in one-off yearly sums could partly explain the anomaly of the declining monetary value of the defaults, set against the rise in numbers of returned cheques.
"Businesses and people are still living beyond their means, which is leading to cheques being bounced," said one economist based in Dubai.
tarnold@thenational.ae
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The alternatives
• Founded in 2014, Telr is a payment aggregator and gateway with an office in Silicon Oasis. It’s e-commerce entry plan costs Dh349 monthly (plus VAT). QR codes direct customers to an online payment page and merchants can generate payments through messaging apps.
• Business Bay’s Pallapay claims 40,000-plus active merchants who can invoice customers and receive payment by card. Fees range from 1.99 per cent plus Dh1 per transaction depending on payment method and location, such as online or via UAE mobile.
• Tap started in May 2013 in Kuwait, allowing Middle East businesses to bill, accept, receive and make payments online “easier, faster and smoother” via goSell and goCollect. It supports more than 10,000 merchants. Monthly fees range from US$65-100, plus card charges of 2.75-3.75 per cent and Dh1.2 per sale.
• 2checkout’s “all-in-one payment gateway and merchant account” accepts payments in 200-plus markets for 2.4-3.9 per cent, plus a Dh1.2-Dh1.8 currency conversion charge. The US provider processes online shop and mobile transactions and has 17,000-plus active digital commerce users.
• PayPal is probably the best-known online goods payment method - usually used for eBay purchases - but can be used to receive funds, providing everyone’s signed up. Costs from 2.9 per cent plus Dh1.2 per transaction.