Global Compliance

Obtaining a loan as an Emirati National

The UAE has a population of around 9.5 million, with its national population being approximately 2 million. This is a very small faction of the total country, and this fact in itself tells you a lot of things about the country. Being a relatively young country, the UAE has risen to its famous heights only within the last few decades, and the growth has indeed been rapid. The country is now a world famous and extremely popular destination for both the business minded, and the tourists alike.
However, the locals of the country, while far fewer in number than foreigners, will likely be eligible for certain different types of loans. This is due to the fact that, since they are permanent residents of the country, there is a greater level of security in providing them with a loan.
The banking and financial sector within the country is governed by the Central Bank of the UAE. They play a wide role in the managing and regulating of the financial and banking industry, and their duties and responsibilities are as follows:

• To act as the governments bank.
• To produce legislation that will be followed by all financial and banking entities within the country.
• To ensure the steady growth of the country’s economy.
• To produce and distribute the national currency.

The process through which Emirati nationals obtain loans is generally similar to that of foreigner though due to the way in which loans within the country are generally obtained.

The Process of Obtaining the Loan
Requirements:
In order to obtain a personal loan in the UAE, there will be certain documents that will be required. The documentation is slightly different for an Emirati national compared to a foreigner, and consists of:

• Emirates ID of the individual.
• Salary certificate/proof of pay for at least the last 3 months.

It must be noted that in general, these are the minimum requirements. Individual banks may request further documentation, and these are usually found on their websites. One should be prepared and expect further requests. The reason for this is due to the fact that banks are required to judge and decide whether an individual is applicable to receive the loan they are requesting. This is to so that banks will only lend if they are sure of the individual case.
Once the documents have been provided and the banks have received what they have requested, there will be a waiting period while the bank makes its consideration.
Types of loans:
There are numerous types of loans that one can apply for. Different banks will offer different loans, and they will have their own set limits and timelines available for each.
This is something that one will have to consider before applying for the loan. Different loans include the usual personal loan, automobile loans, Credit card loans, home loans and more. The basic personal loan can be used for a wide variety of activities, though if one is looking for something more specific, one of the other available options may be more relevant.
Interest:
When considering where to obtain a loan from, one key aspect many will look to will be the interest rate. The rates across the UAE banks are often quite competitive, though Islamic banks do not charge any interest what so ever. Islamic banks are covered under the Federal Law Number 6 of 1985 regarding Islamic Banking (Islamic Bank Law), in which Article 4 (b) states that Islamic banks are exempt from the Union Law Number 10 of 1980, the Central Bank Law (the Central Bank Law), Article 96 (e). This Article specifically regard the charging of interest on loans. Since Islamic banks do not charge interest, they will have other methods of obtaining their profits. They will likely have certain charges in place, and those are calculated and arranged in different ways.
However, in the case of conventional banks, there is a specific flat interest rate which is to be charged, and there is a calculation in place to decide what the flat rate is.
The formula is as follows:
Principal x interest rate x loan period (in months) +1       
2             X          100              X          12
From here, the monthly interest value is calculated using the formula:
Loan balance at the beginning of the month × Interest rate           
12   ×                                       100
The Contract:
Once the loan has been approved of by the bank, a contract must be drawn up between the parties. This contract is to include the start and end dates of the loan, the amount to be paid back monthly, any fines for failures to meet deadlines and the interest rates that have been agreed, or in the case of an Islamic bank loan, the exact fees and charges upon the individual and how those have been calculated.
On top of the basic contract, there will be an application as mentioned under Article 12 (b) of the RRBLSOIC which must be filled out and will include the basic conditions of the loan. This is to be drafted in both Arabic and English.
Choice of banks:
There are a wide range of banks from which loans can be obtained, and they will all have certain stand out deals or offers. The amount a bank is willing to lend is generally much higher for UAE national than it is for foreigners. One can usually obtain a loan of around 20 times their monthly salary, and the pay back duration can be up to a maximum of 4 years. There is also a maximum cap on what a loan can be, though it varies between banks. It ranges from between AED 1 million to AED 4 million. On top of this, some banks offer further incentives such as salary transfers not being required for loans and more.

Obtaining a loan as an Emirati national is much the same as obtaining one as a foreigner. The primary differences are in the documentation requirements and the amount that can be taken as part of the loan.

Glossary

• Central Bank of UAE (CBUAE): This is the nation’s governing bank, and is responsible for regulating the financial sector of the country. Its duties include producing and distributing the national currency, acting as the government bank, ensuring steady growth of the country’s economy and producing the legislation and circulars that govern the financial and banking institutes.
• Union Law Number 10 of 1980: Also known as the central bank law, this law outlines the duties and responsibilities along with the powers of the Central bank. It also outlines some of the basic regulations regarding banking activities.
• Conventional Bank: These are the more common of the two types of banks, and are any banks that are not Islamic banks.
• Islamic Banks: Theses are banks which follow Islamic laws and traditions, and are required to be sharia compliant in all of their activities. This is most well-known for the matter of interest on the loans.
• Regulations Regarding Bank Loans and other Services Offered to Individual Customers (RRBLSOIC): this is a 2011 piece of Central Bank legislation which regards loan regulations within the country.
• Private/personal loan: these are loans that are given to private individuals (as opposed to business entities) for purposes that are specified, secured by assigning salary and end of service indemnity or any regular income from a well-defined source.