Banks Lent Too Readily Before Downturn – Survey

Respondents to online .Commerce questionnaire say accessing finance prior to economic crisis was too easy.

Banks across the UAE were far too reckless with lending throughout the mid-noughties as the first signs of an economic downturn began to emerge, respondents to a .Commerce survey have claimed.

Nearly 73 per cent of people polled believe few banks carried out stringent financial checks on customers, making it easy for individuals and companies to access cash.

Other respondents said the government could have better managed the UAE banking industry prior to the financial crisis. Among those polled, nearly 45 per cent claimed the state had done an average job overseeing the sector, while more than 16 per cent said it was less than adequate.

On whether it would be easier for businesses to access credit in the UAE this year, 49 per cent of respondents said yes. The remaining 51 per cent believe it will be equally as tough to secure credit in 2010 as last year when most banks curbed their lending amid the financial crisis.

In other findings, redundancies remain a concern for many UAE businesses, with nearly 44 per cent saying further cuts are fairly likely this year. Around nine per cent said they were very likely, while almost 47 per cent insisted there would be no scaling back in 2010.

Company profits were hardest hit last year, according to 44 per cent of those polled. Employees also suffered, with 15 per cent of respondents saying their employers made redundancies in 2009 as businesses looked to cut costs. Other corporate issues affected by the downturn were cash flow (28 per cent) and access to credit (11 per cent).

But even during a crippling downturn, some companies still managed to claim profits from their investments last year. Commodities and currencies provided the most lucrative returns, accounting for 26 per cent and nearly 23 per cent respectively.

Infrastructure, private equity and real estate also generated profits for some businesses throughout 2009.

The June edition of .Commerce will feature an extensive report covering the results from the readers’ survey.