As Qatar’s much-awaited sponsorship law is reportedly getting final touches, its likely domino effect is being increasingly felt by expatriates.
A large section of the expatriate population feels that banks are adopting a conservative approach towards their requests for personal loans and claim lenders are rejecting applications of even those with a clean credit record.
They say some banks act arbitrarily while dealing with the expatriate community. There is an increasing number of stories of lenders rejecting applications of ‘eligible’ customers.
Personalloans to expatriates are limited to employees of companies ‘approved’ by banks. Unfortunately, a large number of reputed mid-size companies are not on the ‘approve list’ of many a bank, which means credit facility is being arbitrarily denied to a large number of applicants.
On the criteria for preparing the ‘approved list”, a top banker said: “We go by companies’ turnover, number of employees and their basic pay. We have a target for credit facilities every year and the number of companies will be restricted to meet it. It’s true that all eligible companies are not covered by banks.”
Nijas Tharamel (name changed on request), a mid-level employee of a reputed company, says: “As per Qatar Central Bank’s (QCB) guidelines, I am legible for a personal loan of up to QR300,000. I approached more than half a dozen banks, all said my company is not on their ‘approved’ lists.
“I am earning a fairly good salary. My bank can check my credit history. It’s so clean. Still, they rejected my application for QR200,000.”
Lack of uniform guidelines is another problem faced by customers.
For example, even if an expatriate meets all criteria for a loan, some banks ask for a guarantor. In such an eventuality, the guarantor needs to transfer his/her account to the bank before it sanctions the loan, said another Asian.
“It’s very difficult to get a guarantor. Finally, I managed to raise funds back home at an exorbitant interest rate,” he said.
“My bank dragged its feet over my application for over a month before rejecting it. When I pursued further, it offered me 35 percent of the amount I had applied for,” said another customer who works with a mid-size company.
Inquiries reveal that the risk departments at certain banks adopt a rather conservative approach towards some nationalities at times.
A risk assessment expert working for a top Qatari bank admitted that nationality matters for some banks while sanctioning personal loans. This is part of rebalancing the demography of their portfolios.
For instance, guidelines demand from us to restrict over-concentration of loanees belonging to a particular country, at a specific branch. To balance the demographic representation, there will be restrictions on customers belonging to the nationality in question for a limited time.
Local Arabic daily Al Arab recently quoted a top QCB official as saying that some banks take “precautionary” measures in terms of lending to expatriates in view of reports of possible changes in sponsorship and exit permit rules.
The official said it was too early for banks to change their policies, as the possible reform of sponsorship and exit permit rules is under way.
“Each bank can have its policy to manage risk, but it should not contradict the QCB’s policy and guidelines,” he said.
The daily reported that banks were urging the regulator to make it mandatory for expatriates to provide guarantee from a Qatari. Alternatively, applicants may be asked to provide a guarantor to undertake to repay 50 percent of the loan in the event of default. The guarantor could either be a Qatari or expatriate.
According to industry sources, there is a steady increase in the number of expatriates ‘slipping’ out the country after taking loans. And this has forced banks to tighten credit to certain nationalities.
The official said many banks had stopped giving personal loans to crew members of airline companies. Loans are restricted to only ground staff. A major chunk of Qatari banks’ non-performing loans is those defaulted by expatriates.
QCB’s latest data reveals the number of defaulters has increased marginally despite stricter lending.
Non-performing loans of commercial banks in 2013 were 1.9 percent of the total, up 1.7 percent the previous year. Total personal loans to individuals in 2013 stood at QR80bn. The ratio of total provision as a percentage of total assets was 1.3 percent compared to 1.2 percent in 2012.
Banks are grappling with the problem of loan defaults. Some have suffered more losses than others because there is no insurance attached to personal loans.
“Expatriates can leave the country freely, so banks have to carefully monitor the status of their personal loans, especially in the current economic climate with regard to redundancies. International investigating network agencies are not extending enough support to banks to track down the offenders, a banker said.
If the expatriate community is crying foul over the alleged discreetness of bankers, Qataris are facing the problem of going overdrive and Qatari experts warn nationals against their craze for credit.
Family disputes over consumer loans are one of the major reasons for break-ups, shows data released by Family Consultation Centre. An estimated 30-40 percent divorces are happening due to disputes over repayment of persona loans, Al Raya reported, quoting figures released by the centre.
Experts claim personal loans to nationals by the end of October 2013 totalled QR38.1bn, up QR2.8bn from a year ago.
The ‘no-holds-barred’ sanctioning of consumer loans to nationals, especially youth, is creating problems in families. Most young people use the money to buy luxury goods or meet their wedding expenses. Banks should review their credit polices for young Qataris, experts say, calling for interest-free special funds to meet Qataris’ wedding expenses.
When it comes to citizens, banks are just doling out money without properly evaluating their repaying capacity. This is creating huge problems in families, said another Qatari expert.
It is surprising that working Qatari youth are still opting for personal loans, despite the fact that the government has more than doubled their salaries. People earning over QR50,000 a month and taking more and more personal loans is a debatable issue within the Qatari society, said Abu Saleh Al Marri.
According to Mohammed Rashid, another Qatari, before sanctioning loans to young Qataris, banks must ensure family members are aware of the credit facility being offered to him/her. The family should also be informed about the consequences of any default in repayment.
As per guidelines, Qataris can seek a loan of over QR1m. If they do not invest it in a proper manner, it will weigh heavily on their future, he said.
According to Mohammed Al Thamimi, a lawyer, cases of bounced cheques account for 51.1 percent of total cases heard at the preliminary court last year. Banks using various media platforms offer attractive packages to lure Qataris and dud cheque cases come to courts by the hundreds daily. Last week, the court heard some 200 cases on one day. And this week, about 300 cases were heard by courts, Al Sharq reported.
Nour Al Maliki, General Secretary, Supreme Council of Family Affairs, in an interview to Al Sharq recently said the burden of loans is one of the key challenges faced by Qatari families.
She said a large number of Qataris had taken huge personal loans and the majority belonged to the ‘moderately earned to middle-income’ group.
“To address the issue, the council launched a campaign during 2010-11. Now we are pushing to restrict the number of advertisements issued by banks announcing attractive packages to lure young Qataris,” she added.
It’s true that banks are sitting on huge assets. But they should not throw open their treasure chests to young Qataris. A large number of Qatari families are grappling with the ‘debt’ problem. The government should intervene, said another prominent Qatari.
According to latest QCB data, personalloans, which include personal, vehicle and credit card loans, stood at QR80.2bn in 2013, an increase of about 13 percent or QR9.2bn from QR71bn in 2012.
The Peninsula
