OBG talks to Hesham Abdulla Al Qassim, Vice-Chairman, Emirates NBD

Interview: Hesham Abdulla Al Qassim

How will the introduction of a new credit bureau affect lending activity in Dubai?

HESHAM ABDULLA AL QASSIM: Banks will be able to make more informed decisions about the creditworthiness of existing or potential customers, rather than have to rely on customer banking behaviour and customer disclosure. The credit bureau will enable a bank to analyse a potential customer’s behaviour even when that bank and customer do not have a relationship with each other. As the bureau intends to carry default history of customers for five years, the availability of such data should encourage customers to borrow more responsibly, and banks will be able to factor in historic payment and default information when considering credit applications. Information on payment history and existing customer leverage will enable banks to more accurately price the risk of specific credit propositions.

With intra-regional mergers and acquisitions activity (M&A) showing signs of revival, how do you see the deal flow in the Middle East moving forward?

AL QASSIM: We are seeing increased Middle East and North Africa (MENA) intra-regional M&A activity as more companies look to expand their scope with cross-border acquisitions. MENA companies often have a better understanding of the regional risks and rewards than foreign firms, making them more comfortable with regional expansion or investment before embarking on less familiar global territories. That said, there has been a recent surge in M&A activity as both regional and global firms seek new opportunities within the MENA region. Overseas companies have seen success and seek additional potential investments and joint venture partners to expand into these markets.

In what way could a new UAE law on bankruptcy impact on Dubai banking institutions?

AL QASSIM: The law is expected to bring clarity in governance structure, authority and responsibilities of debtors, creditors and guarantors, and equality in the asset distribution process to protect all stakeholders. In the short term there may be some increase in bankruptcy filings, which may have an adverse impact on the sector. On the other hand, the law can bring stability and confidence to enterprises and entrepreneurs in the long term. Moreover, companies can work through their financial challenges with banks, thus allowing businesses to revive and continue their operations, which would ultimately have a positive impact on the business environment and the banking sector.

What new products and services are likely to come onto the market in the near term?

AL QASSIM: The range of products and services offered to customers of small and medium-sized enterprises (SME) has grown dramatically. In addition to working capital loans, cash management products catered towards SME customers include term loans and project funding made for project-specific cash flows. More innovative products facilitate growth in SMEs, such as invoice discounting and supply-chain financing. Given significant outside investment in the region, special consideration is also being made to offering finances to foreign firms operating in the UAE. Beyond financial products, banks are beginning to offer dedicated African and Asian trade desks to assist supply-chain management, along with advisory services regarding trade, treasury, investment and insurance products. Online banking is another draw for SME customers.

What do you identify as the most critical elements of the proposed UAE mortgage law?

AL QASSIM: Law 14/2007 has provided a framework for mortgage foreclosures, which assists banks in liquidating collateral of defaulted customers in a reasonable time frame. This has built confidence among banks to continue lending in the consumer mortgage space. With a well-defined process, fixed timelines and costs, banks can evaluate and develop adequate risk management policies for consumer lending in mortgages.