Expat loans

Muna Al Fuzai

Local newspapers recently published an alarming report on expatriate loans in Kuwait. The report revealed, quoting banking sources, that some banks have tightened the terms of granting personal loans in recent months, especially to expatriates, who number more than 1.1 million employees! The report mentioned that some banks have doubled the minimum salary requirement for consumer loans. One of the banks requires that the monthly salary for personal loans for private sector employees should be around KD 650 to KD 800. The average salary condition in other banks is around KD 400, while one or two banks are still granting loans to expats with salaries ranging from KD 250 to KD 300, but on very strict terms.

According to the new strict regulations, the percentage of expatriates working in the private sector ‘unqualified’ to obtain loans can be higher than before. The report also stated that the proportion of expatriates working in the private sector whose monthly wages are less than KD 180 is 59.29 percent, while the proportion of those earning between KD 180 and KD 360 is about 24 percent. Those with monthly wages of KD 360 or higher total 16.51 percent, while workers with monthly wages of KD 420 or more form 14 percent of the workforce.

I know that most banks internationally refuse to give credit to small wage earners on the grounds that the risks of financing are very high, especially since it is not expected that the bank will benefit from the service provided to them or get high returns. I know that banks have the right to protect their financial interests and that of their customers, and identify the segments that could be of benefit to the bank. But this behavior can lead to a reduction in the number of beneficiaries of personal credit in the future. The banks claim that they want guarantees of regularity in payments, and are concerned that an expat borrower might be exposed to sudden administrative deportation and the bank will lose its money. This is possible, but how many expat borrowers fall into this category? It could happen to anyone, even those with high incomes.

I see other concerns here. For example, I can’t receive a loan to buy a car, because a loan from a bank can only be used to buy a house or renovate one. But this disregards the local community’s needs in Kuwait, because you may need a loan for your child’s wedding, or to buy a car for your family or even take your spouse for medical treatment overseas. I should get a small loan as long as I have the adequate and appropriate guarantees for repayment. This is my opinion.

This approach by the banks and any new measures will not stop people from applying for loans, but it encourages the spread of so-called cashing companies. People fall victim to the greed of these loan sharks. Borrowers are not protected, and this remains worrying for all. A review of this issue is required on humanitarian and financial grounds, especially with the large number of expatriates in Kuwait. I think establishing a new small financial portfolio for these borrowers – whether citizens or expatriates – with some conditions can be of help and ensure all parties’ interests are secured.

By Muna Al-Fuzai

This article was published on 01/01/2018