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Rate of debt skipping falls 90% at Dubai’s biggest bank

  • People ‘skip’ country to avoid debt
  • New laws encourage resolution
  • 94% of UAE companies are SMEs

There has been a dramatic decline in the number of people leaving the country to avoid debt obligations to UAE banks. 

The fall in so-called “skips” is a result of the Gulf state’s introduction of legal reforms such as the decriminalisation of bounced cheques, and new insolvency and bankruptcy laws, experts said.

In the past the UAE’s stringent insolvency regulations often pushed small business owners to flee the country to avoid imprisonment for unpaid debts or bounced cheques.



“We’ve seen up to 90 percent decrease in skips,” Rohit Garg, group head of business banking at Emirates NBD, told AGBI.

“No business owner wants to run away leaving behind his business. He wants to work it out with his lenders, suppliers and buyers. They did not have that opportunity before.” 

Dhiraj Kunwar, managing director of business banking at RAKBank, said the impact of government reforms is evident in the UAE banking sector’s “benign credit environment”.

“Credit losses are very low,” he said. “We now see companies whose [businesses] are not going as per plan working with the banks to restructure and reschedule debts, and create a path to get back on track … as opposed to a binary, either I make it or I don’t [situation].”

The lender has almost 50,000 small and medium-sized enterprises (SMEs) on its books and last year handed out AED2.5 billion ($680 million) of loans to more than 3,000 companies.

Garg added that the introduction of a national credit bureau, VAT and corporate tax has strengthened the case for SME lending, making it a more viable business case for banks.

“These [developments] have contributed to the bank’s ability to verify information,” he said. “Lending to SMEs is not just a commitment to the development of the economy, but also a sound commercial decision.”

Garg said Emirates NBD’s SME lending has risen by 50 percent over the past 12 months, following a nearly 35 percent increase the previous year.

Emirates NBD is a partner of the Dubai International Growth Initiative, announced by Dubai’s Crown Prince Sheikh Hamdan. 

The initiative aims to help SMEs in Dubai scale globally. It will allocate a total of AED500 million to provide up to AED15 million in financing to eligible businesses for up to seven years at the Emirates’ interbank offered rate, without any additional margin. 

Garg said about 12 percent of the funds had already been approved for disbursement.

Ayman Itani, CEO of business consultancy Think Media Labs, said the legal reforms reduce business friction, acting as growth accelerators for SMEs. 

“Without such an enabling environment, the growth of SMEs would stall or even decline,” he said.

However, Amir Ahmad, partner at law firm Reed Smith, said despite the positive impact of reforms, challenges remain in debt resolution, including matters such as legal aid access, cultural stigma, enforcement of debt repayment and economic fluctuations.

Rajesh Jagasia, a Dubai-based legal consultant and owner of Right Management Consultancy, added that a three-year payback period of 50 percent debt under current laws may be insufficient for businesses to stabilise and become profitable. 

“It takes time for a business to revive so it can clear both existing and ongoing debts,” he said. 

“The payback period should be at least five to seven years.”

SMEs make up 94 percent of companies operating in the UAE and contribute more than 60 percent to the country’s GDP.

The UAE’s new laws

The UAE bankruptcy and restructuring law went into effect on May 1, introducing a specialist court to oversee disputes and replacing the 2016 bankruptcy framework.

It emphasises the importance of amicable resolutions, broadening the scope for debtors to seek agreement with creditors.

It will also allow secured creditors to enforce claims against assets directly through the bankruptcy court, which should streamline enforcement.

The move is expected to have a significant impact on how insolvency cases are handled in the UAE, aligning the country more closely with global best practices.

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