The volume of banking finance in the UAE surged by 11%, equivalent to 250 billion dirhams, between January and August of this year. Several factors contributed to this increase, including a rise in demand and the facilitation provided by banks.
Experts noted that the credit market has experienced a growth rate higher than the same period last year, influenced by various relative factors, including changes in interest rates which are trending lower.
These influences are expected to have a strong long-term effect, reflecting market elements such as banking policies and the dynamics of supply and demand in both the real estate and credit markets.
They also highlighted an increase in personal lending segments and an improvement in client creditworthiness, predicting significant movements in financing as new decisions are anticipated regarding interest rate reductions or at least maintaining current levels without increases in the near future.
According to recent data from the central bank, banking finance provided by operating banks in the country rose by nearly 250 billion dirhams from the beginning of the year to August, with private sector beneficiaries being the primary recipients of these credit facilities.
In terms of financing distribution during this period, the industrial and commercial business sector, including large companies and SMEs, received an additional 54 billion dirhams since the start of the year.
This reflects a growth of 6.5%, while personal loans for individuals increased significantly, amounting to roughly 52 billion dirhams with a growth rate of 10.7%.
This period also saw successive decisions from the central bank to maintain interest rates throughout the first half of the year, in line with actions taken by the US Federal Reserve. Rates were then reduced slightly in September at the close of the third quarter.
The stable monetary policy observed in the local market has been a driving force behind the lending activities of banks, according to banking expert Amjad Nasr.
He noted that the extended period of stability and the recent gradual reduction in rates has lowered borrowing costs and heightened client appetite for financing, thereby boosting confidence among certain borrowing sectors, particularly in personal loans.
He also pointed out the strong activity in non-oil sectors that further enhanced bank borrowing, especially in construction, tourism, and retail trade.
Financial services have led to an increased need for businesses to expand activities and seek additional financing, whether for operational support or asset acquisition. Banks have responded by offering significant flexibility in providing long-term facilities.
This is especially true in areas like mortgage lending and project financing, as banks compete to attract individual customers with flexible financing options, preferential interest rates, and new rewards programs that have broadened the borrower base and improved lending terms.
Banking sector specialist Ahmed Salem emphasized that interest rates have become a crucial factor in borrowing decisions, particularly for essential consumer goods like cars and household items.
These borrower segments continuously seek optimal opportunities for financing. Salem highlighted the broad accessibility of loans to various customer segments.
Banks have become well-equipped to reach new clients, particularly younger borrowers or newly employed individuals, through advanced technologies, applications, and digital channels that facilitate immediate and flexible lending conditions.
Salem anticipates an accelerated growth rate in banking loans during the fourth quarter of this year, coinciding with new decisions on interest rate reductions, which could enhance overall lending growth rates in 2025 compared to the credit slowdown witnessed during previous interest rate hikes.