The UAE Banks Federation (UAF), a professional body representing 49 banks in the UAE, has decide to suspend legal action against small and medium sized enterprises struggling to repay debt for up to three months. According to the federation, the new mechanism or ‘modus operandi’ that in effect would act as ‘a mini insolvency law’ aimed at preventing a surge in defaults. UAF chairman AbdulAziz Al Ghurair said the initiative would be applicable to companies that have borrowed Dh50 million or more from several banks and are showing signs of financial stress that often lead to inability in servicing their debts. Current concerns about the sustainability of SME and corporate lending and its effect on the economy as a whole has led the UAF to take a more pro-active role in bringing together banks and borrowers to minimise incidents of total default, he said. The federation is also discussing the impact of a likely move to decriminalise bounced cheques which is aimed at helping defaulting businesses to stay put and restructure their loans instead of ending up in jail or fleeing from the country.
