Al Etihad Credit Bureau Begins Issuing Company Reports

The UAE’s Al Etihad Credit Bureau (AECB) has begun issuing credit reports on commercial organisations in the country.

Reports issued by the bureau will include a company’s full address, details of its ownership, credit facilities that are being used, total amount of credit taken and a firm’s track record of repayment

The reports will also help UAE companies to check that information held by banks is accurate when applying for a loan, Al Etihad Bureau said in a statement.

“As the UAE’s financial sector matures and increasingly positions itself as a competitor on the global financial stage, it is essential for the country’s banks, lenders and utility providers to have as much information at their fingertips as possible when making important commercial credit decisions – especially as the amount of credit in question can be substantial,” said Marwan Ahmad Lutfi, CEO of Al Etihad Credit Bureau.

“Currently we can say that 65,000 of UAE-registered companies are using credit facilities, such as loans or overdrafts. This means that 16.25 per cent of registered companies in the UAE are active in the lending market. Between them, they are using 308 thousand different types of credit contracts, including various loans, overdrafts and credit cards.”

The credit bureau was one of the long suggested solutions by UAE banks to improve the dismal lending rate to small and medium businesses in the country.

A World Bank study, which examined the levels of bank lending to SMEs in MENA, found that the share of loans given to smaller firms was the lowest in the world. Falling even further to two per cent in the GCC.

A white paper released by the UAE’s Khalifa Fund on SME financing also found that the rejection rate for SMEs applying for a loan in the UAE ranged between 50 to 70 per cent.

Lutfi told reporters during the launch last year that the bureau was just a starting point to improve SME lending in the UAE.

“It is still too early to say how the credit bureau will affect SMEs but it is a core component of our development in 2015,” he said.

“We look at owners and what banks will be looking at will be the credit history of the owners of the SMEs. They also require an objective analysis and in that sense they might need slightly more developed structures and not just a data report.”

However SMEs in the country are optimistic about the prospects.

“The establishment of the AECB will aid financial inclusion and reward entrepreneurial spirit,” said Mahesh Shahdadpuri, executive director of TASC Outsourcing.

“The AECB reports will ensure that SMEs are transparent in the way they do business and consequently help them find funding. It will also make lenders feel confident in their investment.

“Before the AECB, lenders would provide investments based on relationships, especially as most entrepreneurs do not have assets to their name when they start out. An AECB report will act as a formal third party endorsement for investors.”

Al Etihad Credit Bureau launched in November last year, following delays, with the first phase covering all residents and citizens’ credit history.

A wider plan to connect with credit bureaus of other GCC countries is also planned, Lutfi previously said,