Banks in the UAE have offered an AED7 billion lifeline to more than 1,700 companies in the country that have run into financial trouble.
As part of a rescue mission, nicknamed ‘Modus Operandi’ by the UAE Federation of Banks, a lobby group, the lenders helped the defaulting small and medium enterprises (SMEs) restructure their outstanding loans.
AbdulAziz Al Ghurair, chairman of the UAE Banks Federation, said some debt restructuring cases were under negotiation.
“All banks were involved and responsible to consider every option to support their clients and help them stay in business and succeed, especially SMEs, which represent more than 90 per cent of the country’s non-government GDP,” said Al Ghurair.
The CEO Advisory Council of the banks’ body hailed the new bankruptcy law, approved by the country’s cabinet earlier this month, saying the existence of such a legislation is a “critical factor in both stimulating new entrants to the SME sector, as well as inward investment from overseas.”
The law, expected to come into force by the beginning of 2017, will reduce the risks of doing business in the country by allowing businessmen and executives to avoid time in jail if their companies fail to pay debts.
At present, the UAE does not have modern bankruptcy regulations, making it difficult for companies to restructure or wind up their activities.
Under existing legislation, unpaid debt or the issue of a bounced cheque can land businessmen in jail. That has proved problematic for smaller companies in particular and some executives of troubled firms have fled the country, leaving behind bad debts.
Such debts, known as “skips”, totalled more than $1.4bn last year, bankers estimated.
“We commend and welcome the legislation of the bankruptcy law, which the government has recognised as a pre-requisite to the country’s future economic development and as an essential tool to maintain the well-being of the business and environment economy,” remarked Al Ghurair.
(With inputs from Reuters)