Emirates Islamic, a Sharia-compliant bank based in Dubai, said it expected 11 per cent loan growth in 2016, even as the economy starts to show signs of strain that is likely to dampen GDP growth this year.
The lender, the Islamic financing arm of Emirates NBD, said it was counting on an increase in trade finance, retail lending and loans to small and medium-sized businesses – a segment that has shown the most sign of strain this year – to expand its balance sheet.
“We’re still positive,” said Jamal bin Ghalaita, the chief executive of Emirates Islamic, in Dubai. “We expect to grow 11 per cent next year. Our loan book today is 37 billion [dirhams]. We think we will add 3 billion- plus to our loan book next year, spread across corporate, SME and individuals.”
The UAE’s Central Bank governor, Mubarak Al Mansoori, this week said that he expected economic growth to slow to 3 per cent this year from 4 per cent last year as weaker energy prices hit government spending.
UAE banks are becoming increasingly risk-averse when weighing loans to businesses and many bank chiefs say they expect loan growth overall to slow next year from the rate of between 8 and 9 per cent in the past couple of years.
Small banks, however, that rely heavily on lending to SMEs and individual customers can outperform peers in growth because they are either starting from a low base or are getting high margins from loans to businesses and individuals that carry higher risk. According to Abdulaziz Al Ghurair, the head of the country’s banking federation, owners of SMEs may have left up to Dh5bn of debt unsettled after skipping town this year.
“Most banks our size depend on SMEs, so we will continue working with them and find a way of financing them,” Mr bin Ghalaita said. “There are skips but imports of things like foodstuffs will continue to import.
“Has the market slowed down? Yes, it’s slowed down a bit but we don’t have a slowdown financing the small and medium-sized enterprises. But if any sector slows down, we move to another sector.”
Separately, the bank said it started an Islamic Trade finance online portal that will allow its corporate and business customers to do transactions such as opening letters of credit digitally, reducing the amount of time customers take to carry out such tasks. As well as reducing bureaucracy and trips to the bank, going digital also helps the bank to reduce costs, Mr bin Ghalaita said.
“Any organisation today has to be fit. Fit means you have to keep your costs at bay because customers can go to the internet and see the price of everything, price of banking, price of commodities. So we have to be more digital to keep our costs down,” he said.
Follow The National’s Business section on Twitter