CBK details new lending regulations

KUWAIT: The Central Bank of Kuwait (CBK) held a press conference yesterday to explain new regulations related to loans. The main goal of issuing these regulations is to meet the financial needs of clients and support financial stability. “CBK modified the rules and regulations for granting personal loans and financing facilities – both personal and for housing – by banks and financial companies according to the movement of the basic indicators of the Kuwait economy, in addition to banking performance and other factors related to loans,” said Yousef Al-Obaid, Deputy Governor of CBK.

He said the Central Bank has special concern for consumption and installment loans because they affect a large segment of people. On Saturday, CBK increased the maximum amount of loans and Islamic financing for consumer purposes to a limit not exceeding 25 times the net monthly salary of the borrower or a maximum of KD 25,000. For loans and Islamic financing for housing purposes, the maximum limit remained KD 70,000. Thus the total amount that can be obtained by a customer in loans and Islamic financing is KD 95,000. CBK has also notified the ministry of commerce and industry of the new lending regulations to avert any unjustified rise in prices of commodities and services.

According to the new regulations, financial institutions granting the loan should study the financial and credit status of the client and check the purpose of the loan. These institutions should advice clients about their needs and explain the dangers of additional financial commitments. “The consumer loan can be for financing personal needs and there is no need for providing documents of proof for the use of the loan. But the purpose of the housing loan is clear – it should be for house restoration, building or buying a house for living, and the documents for this loan should be provided,” Obaid said.

Borrowers can get a new loan in addition to their current loan. “There are certain conditions for approving a new loan – the client should have paid at least 30 percent of the installments on time, the new loan should be based on a new contract and the present contract will be canceled, while respecting the maximum percentage of the monthly installment (40 percent of the net salary of employees and 30 percent of retirees),” he added.

“Retired clients can demand extending the installments for an additional year from the original five years for a consumer loan, and by five years from the original 15 years for a housing loan. This will decrease the monthly installment, but under the condition of not dropping below 30 percent of the retiree’s salary,” noted Obaid.

“Financial institutions are not allowed to use the client’s indemnities or any other cash in his account or even hold it to pay installments that are not due unless with the written approval of the client. Also, in case of early repayment of the loan or part of it by the client, the finance institution should not charge the interest due for the remaining period of the loan that was already paid,” he concluded.

Waleed Al-Awadhi, CEO of Control Sector at CBK, provided some statistics. “There are a total of 739,450 borrowers in Kuwait – out of them 429,000 are Kuwaitis, 90 percent of whom are under the age of 50. The average salary of the borrowers is KD 1,100, while the average consumer loan is of KD 3,600, and the average housing loan is of KD 23,000,” he pointed out.
“The loans portfolio grew by 14 percent from 2000 to 2017 from KD 1 billion to KD 12 billion. But each period had a different growth rate. From 2000 to 2008, growth reached 18 percent, and from 2009 to 2017, it dropped to 11 percent,” Awadhi said. “Salaries registered a growth of 12 percent between 2004 and 2017, while the cumulative inflation rate reached 67 percent. So what cost KD 15,000 in 2004 cost KD 25,000 in 2017,” he stressed. The new lending regulations are effective from Wednesday.

By Nawara Fattahova


This article was published on 11/11/2018