UAE banks agree on SMEs rescue plan

The United Arab Emirates Banks Federation (UBF) has agreed on a new rescue plan aimed at helping SMEs struggling with loan repayments amid an economic slowdown.

In an emailed statement, UBF chairman Abdulaziz Al Ghurair said the move reflects the commitment of banks "to apply a coordinated approach to alleviate SME funding difficulties" and continue support to the sector.

"The plan includes the availability of an interim suspension of payment and the creation of a conciliation role to assist all parties to reach agreement," the federation said in a statement, adding that banks would assist with the restructuring of debt payments.

During its first meeting of the year, the UBF also discussed a proposed bankruptcy law, the creation of an assets registry law, and the establishment of specialized commercial courts.

Lenders in the UAE have been bracing for an increase in bad debt after several small business owners fled the country to avoid facing jail time. Under UAE law, the bouncing of any check is a criminal offence which can potentially leave the issuer in jail.

In November, Al Ghurair said AED 5 billion in unpaid debt had been left behind by business owners. Defaults in the SME sector have also led several banks to take provisions in recent months.

Write to Joumana Saad at joumana.saad@argaamplus.com