When the Egyptian IT development manager Adel Sayed signed up for a cashback credit card from his bank four years ago, he did not expect to be plagued with calls offering him loans.
“I have a Mashreq MasterCard with a big limit – Dh144,000,” says Mr Sayed, 38, a father-of-two. “It was Dh90,000 originally, then it was increased to Dh120,000 then, just recently, to the current limit.”
Mr Sayed says he spends about Dh10,000 a month on the card and never fails to pay it off in full each month, as he wants to avoid paying interest for religious reasons.
Despite this, Mashreq often offers him the available balance as a loan – a practice mirrored by other UAE banks.
“They say they will offer me Dh134,000. Then it changes based on my circumstances, and they offer me Dh88,000 over six, 12 or 18 months,” he says.
“I get many calls – sometimes offering an interest rate of 0.84 per cent, sometimes even with no interest because I’m a ‘privileged’ customer who pays their salary into their account as well – but with a 2 per cent processing fee. But I do not like loans at all – and not only for religious reasons. I am not comfortable with them; I never feel safe taking a loan.”
Mashreq declined to comment on the case, and these “loans on cards” are not products advertised on its, or any other bank’s, website.
In 2011, the UAE Central Bank capped loans at 20 times monthly income and, two years later, went further by introducing a debt-burden ratio (DBR) that limits any resident’s debt repayments to a maximum of 50 per cent of their monthly income.
This is why an assessment of Mr Sayed’s finances by Mashreq would mean that they could offer him no more than Dh88,000 based on his salary and any other debt burdens. Its original offer – Dh134,000 – was over 50 per cent more than that, when based solely as a “headline”, on the available balance of his credit card limit.
There can be benefits for holding a credit card: the cashback card Mr Sayed has – at 1.25 per cent per dirham spent, plus 5 per cent back on his children’s school fees – makes him about Dh2,000 a year. But because he does not utilise the full balance, it makes him a target for a “credit-card loan”.
As cardholders are already customers, who usually transfer their salary, the advantage of such a loan is that their bank already has all the information it needs, has preapproved you for the loan and can transfer the money quickly.
But easy access to loans can allow debt to spiral.
Keren Bobker, a financial adviser with Holborn Assets and The National's On Your Side columnist, says that many people in the UAE are carrying far too much debt.
“Too many have borrowed money unnecessarily to fund their lifestyle,” she warns. “It takes willpower to say no when offered easy credit. I have come across numerous cases where people have credit card and personal loan balances that are ridiculously high, with monthly repayments far in excess of 50 per cent of their income.”
The National has been inundated with letters from readers with mounting debts since we began running a series of articles on the issue in the summer, highlighting the dangers of easy access to credit.
The total value of all UAE consumer loans stood at Dh332.3 billion in November last year, according to the UAE Central Bank’s monthly banking indicators, up 5.3 per cent year on year.
And according to the Al Etihad Credit Bureau, in November there were about 6.75 million active loans in the country – about two per person.
In 2011, the Central Bank cracked down on financial cold calls in a memo sent to all banks. “It has been decided to prohibit marketing bank loans and other services offered to individual customers through direct contact by telephone,” it wrote. However, it did not specifically ban cross-selling to existing customers, nor mention any punishments if the ban was flouted.
“It does appear that some banks are disregarding this rule,” says Ms Bobker.
Jon Richards, the chief executive of the price comparison website compareit4me.com, says the restriction was a blanket ban, stopping calls across the board – including to existing customers.
“But the lift in the economy in 2013 saw cold calling make a big comeback – not just cold calling about single products, but also cross-calling,” he adds.
A quick perusal of money-comparison sites shows the lowest loan listed at 2.19 per cent flat rate (3.99 reducing), for a cash flow salary transfer loan from United Arab Bank.
The 2 per cent Mr Sayed says he was offered would equate to 3.77 per cent reducing (a rate that is calculated against the reducing, ongoing balance and therefore sees the interest reduce, too, during the loan’s lifetime), which would mean a monthly payment over 18 months of Dh5,036 and a total repayment of Dh90,648.
Jenny, a 35-year-old British teacher who did not want to reveal her full name, says her bank, Emirates NBD, calls her every two weeks on average offering a loan to the limit of her Skywards Platinum credit card, which it recently raised to Dh50,000.
“I spend about Dh3,000 to Dh4,000 a month on the card and have a two-year car loan with Emirates NBD too, for Dh55,000,” she says. “I never let them get far enough to tell me the rate or other details. The amount of calls is really irritating and the offers are totally crazy.” Emirates NBD did not comment on the case.
It is worth remembering that an unsolicited increase in your credit card limit, as seen by Mr Sayed and Ms Sadler, will count towards your possible debt liability and therefore affect your credit report. So if you are planning to take out a separate loan or mortgage, you should ask the bank to reverse any limit increase.
All UAE commercial banks are signed up to the UAE Banks Federation, which introduced a voluntary code of conduct in 2013, augmented recently by a customer charter pledging, among other things, to “only offer credit if they are satisfied that their customers have the capacity to repay and that it meets their customers’ needs”.
Customers do have the option of complaining to the UAE Central Bank, although it says “every effort should be made to settle the matter directly with the concerned bank/financial institution before filing a complaint with the Central Bank”.
Kunal Malani, the head of customer value management at HSBC Bank Middle East, stresses that individuals need to take the responsibility to plan for long-term needs and “use the right financial products to fulfil these needs”.
But he adds: “Working in tandem with the Al Etihad Credit Bureau, the banks need to ensure they promote responsible lending. At HSBC we employ a strict lending criteria that is rooted in understanding customers’ needs and their ability to fulfil their financial obligations.”
Do you have a debt problem? Write to us at pf@thenational.ae.
For a history of credit cards, log on to: thenational.ae/blogs/your-money.
pf@thenational.ae
Follow us on Twitter @TheNationalPF
The specs
Engine: Long-range single or dual motor with 200kW or 400kW battery
Transmission: Single-speed automatic
Max touring range: 620km / 590km
Price: From Dh250,000 (estimated)
How it works
Each player begins with one of the great empires of history, from Julius Caesar's Rome to Ramses of Egypt, spread over Europe and the Middle East.
Round by round, the player expands their empire. The more land they have, the more money they can take from their coffers for each go.
As unruled land and soldiers are acquired, players must feed them. When a player comes up against land held by another army, they can choose to battle for supremacy.
A dice-based battle system is used and players can get the edge on their enemy with by deploying a renowned hero on the battlefield.
Players that lose battles and land will find their coffers dwindle and troops go hungry. The end goal? Global domination of course.
TRAP
Starring: Josh Hartnett, Saleka Shyamalan, Ariel Donaghue
Director: M Night Shyamalan
Rating: 3/5
More coverage from the Future Forum
UNpaid bills:
Countries with largest unpaid bill for UN budget in 2019
USA – $1.055 billion
Brazil – $143 million
Argentina – $52 million
Mexico – $36 million
Iran – $27 million
Israel – $18 million
Venezuela – $17 million
Korea – $10 million
Countries with largest unpaid bill for UN peacekeeping operations in 2019
USA – $2.38 billion
Brazil – $287 million
Spain – $110 million
France – $103 million
Ukraine – $100 million
Company%20Profile
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Cultural fiesta
What: The Al Burda Festival
When: November 14 (from 10am)
Where: Warehouse421, Abu Dhabi
The Al Burda Festival is a celebration of Islamic art and culture, featuring talks, performances and exhibitions. Organised by the Ministry of Culture and Knowledge Development, this one-day event opens with a session on the future of Islamic art. With this in mind, it is followed by a number of workshops and “masterclass” sessions in everything from calligraphy and typography to geometry and the origins of Islamic design. There will also be discussions on subjects including ‘Who is the Audience for Islamic Art?’ and ‘New Markets for Islamic Design.’ A live performance from Kuwaiti guitarist Yousif Yaseen should be one of the highlights of the day.
MATCH INFO
Uefa Champions League semi-final, first leg
Bayern Munich 1
Kimmich (27')
Real Madrid 2
Marcelo (43'), Asensio (56')
The specs
Engine: 0.8-litre four cylinder
Power: 70bhp
Torque: 66Nm
Transmission: four-speed manual
Price: $1,075 new in 1967, now valued at $40,000
On sale: Models from 1966 to 1970
The Outsider
Stephen King, Penguin
The bio
Favourite food: Japanese
Favourite car: Lamborghini
Favourite hobby: Football
Favourite quote: If your dreams don’t scare you, they are not big enough
Favourite country: UAE
Company%20Profile
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Our legal consultant
Name: Dr Hassan Mohsen Elhais
Position: legal consultant with Al Rowaad Advocates and Legal Consultants.
How to protect yourself when air quality drops
Install an air filter in your home.
Close your windows and turn on the AC.
Shower or bath after being outside.
Wear a face mask.
Stay indoors when conditions are particularly poor.
If driving, turn your engine off when stationary.
COMPANY%20PROFILE%20
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SPECS%3A%20Polestar%203
%3Cp%3E%3Cstrong%3EEngine%3A%20%3C%2Fstrong%3ELong-range%20dual%20motor%20with%20400V%20battery%3Cbr%3E%3Cstrong%3EPower%3A%20%3C%2Fstrong%3E360kW%20%2F%20483bhp%3Cbr%3E%3Cstrong%3ETorque%3A%20%3C%2Fstrong%3E840Nm%3Cbr%3E%3Cstrong%3ETransmission%3A%20%3C%2Fstrong%3ESingle-speed%20automatic%3Cbr%3E%3Cstrong%3EMax%20touring%20range%3A%3C%2Fstrong%3E%20628km%3Cbr%3E%3Cstrong%3E0-100km%2Fh%3A%3C%2Fstrong%3E%204.7sec%3Cbr%3E%3Cstrong%3ETop%20speed%3A%3C%2Fstrong%3E%20210kph%20%3Cbr%3E%3Cstrong%3EPrice%3A%20%3C%2Fstrong%3EFrom%20Dh360%2C000%3Cbr%3E%3Cstrong%3EOn%20sale%3A%20%3C%2Fstrong%3ESeptember%3Cbr%3E%3C%2Fp%3E%0A
The Bio
Hometown: Bogota, Colombia
Favourite place to relax in UAE: the desert around Al Mleiha in Sharjah or the eastern mangroves in Abu Dhabi
The one book everyone should read: 100 Years of Solitude by Gabriel Garcia Marquez. It will make your mind fly
Favourite documentary: Chasing Coral by Jeff Orlowski. It's a good reality check about one of the most valued ecosystems for humanity
COMPANY%20PROFILE%20
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Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
The specs
Engine: 2-litre or 3-litre 4Motion all-wheel-drive Power: 250Nm (2-litre); 340 (3-litre) Torque: 450Nm Transmission: 8-speed automatic Starting price: From Dh212,000 On sale: Now
SPECS
%3Cp%3E%3Cstrong%3EEngine%3A%20%3C%2Fstrong%3E4-litre%20V8%20twin-turbo%0D%3Cbr%3E%3Cstrong%3EPower%3A%20%3C%2Fstrong%3E630hp%0D%3Cbr%3E%3Cstrong%3ETorque%3A%20%3C%2Fstrong%3E850Nm%0D%3Cbr%3E%3Cstrong%3ETransmission%3A%20%3C%2Fstrong%3E8-speed%20Tiptronic%20automatic%0D%3Cbr%3E%3Cstrong%3EPrice%3A%20%3C%2Fstrong%3EFrom%20Dh599%2C000%0D%3Cbr%3E%3Cstrong%3EOn%20sale%3A%3C%2Fstrong%3E%20Now%0D%3C%2Fp%3E%0A
FIGHT CARD
Sara El Bakkali v Anisha Kadka (Lightweight, female)
Mohammed Adil Al Debi v Moaz Abdelgawad (Bantamweight)
Amir Boureslan v Mahmoud Zanouny (Welterweight)
Abrorbek Madaminbekov v Mohammed Al Katheeri (Featherweight)
Ibrahem Bilal v Emad Arafa (Super featherweight)
Ahmed Abdolaziz v Imad Essassi (Middleweight)
Milena Martinou v Ilham Bourakkadi (Bantamweight, female)
Noureddine El Agouti v Mohamed Mardi (Welterweight)
Nabil Ouach v Ymad Atrous (Middleweight)
Nouredin Samir v Zainalabid Dadachev (Lightweight)
Marlon Ribeiro v Mehdi Oubahammou (Welterweight)
Brad Stanton v Mohamed El Boukhari (Super welterweight
Company%20Profile
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What is graphene?
Graphene is extracted from graphite and is made up of pure carbon.
It is 200 times more resistant than steel and five times lighter than aluminum.
It conducts electricity better than any other material at room temperature.
It is thought that graphene could boost the useful life of batteries by 10 per cent.
Graphene can also detect cancer cells in the early stages of the disease.
The material was first discovered when Andre Geim and Konstantin Novoselov were 'playing' with graphite at the University of Manchester in 2004.
Blackpink World Tour [Born Pink] In Cinemas
Starring: Rose, Jisoo, Jennie, Lisa
Directors: Min Geun, Oh Yoon-Dong
Rating: 3/5
THE SIXTH SENSE
Starring: Bruce Willis, Toni Collette, Hayley Joel Osment
Director: M. Night Shyamalan
Rating: 5/5
Confirmed%20bouts%20(more%20to%20be%20added)
%3Cp%3ECory%20Sandhagen%20v%20Umar%20Nurmagomedov%0D%3Cbr%3ENick%20Diaz%20v%20Vicente%20Luque%0D%3Cbr%3EMichael%20Chiesa%20v%20Tony%20Ferguson%0D%3Cbr%3EDeiveson%20Figueiredo%20v%20Marlon%20Vera%0D%3Cbr%3EMackenzie%20Dern%20v%20Loopy%20Godinez%0D%3Cbr%3E%3C%2Fp%3E%0A%3Cp%3ETickets%20for%20the%20August%203%20Fight%20Night%2C%20held%20in%20partnership%20with%20the%20Department%20of%20Culture%20and%20Tourism%20Abu%20Dhabi%2C%20went%20on%20sale%20earlier%20this%20month%2C%20through%20www.etihadarena.ae%20and%20www.ticketmaster.ae.%0D%3Cbr%3E%3C%2Fp%3E%0A
MATCH INFO
Uefa Champions League semi-final, first leg
Barcelona v Liverpool, Wednesday, 11pm (UAE).
Second leg
Liverpool v Barcelona, Tuesday, May 7, 11pm
Games on BeIN Sports