The lessons from the 2008-09 debacle have been well-learnt.
Were you around in 2008-09, when you could always spot at least a handful of supercars with keys inside them abandoned at UAE airports, gathering dust before the authorities towed them away? That was a symptom of the global malaise – the financial slowdown that had shaken the foundations of the global economies, and repercussions were felt here in Dubai and elsewhere in the country. It was, of course, a reflection of the carefree attitude of a section of expats who stretched themselves too thin in their greed and the pursuit of a high-rolling lifestyle. But it was also a reflection of the frustration of those who’d genuinely tried but failed in their quest to face the challenges thrown at them by the sands of time.
With a well-oiled system of assigning a credit rating to individuals conspicuous by its absence, some of the more ambitious banks in the country didn’t mind pushing debt to people who didn’t necessarily deserve it while overleveraged individuals were only too happy to receive an additional credit card or a loan top-up to stay afloat until the next EMI came due. But the music stopped and those left with the parcel in the hands had to pay the due. ‘If only I had some way to continue working and repay my debt’ was an oft-repeated sentiment by those who’d gotten caught in the financial maze and lost their way in EMIs, APRs, and amortisation schedules. A good number of such insolvent individuals wanted to fight the worthy battle but took the flight for the want of a proper bankruptcy ecosystem.
While the UAE had already installed a corporate bankruptcy law earlier, yesterday, the Cabinet also approved a federal law to regulate cases of insolvency of individuals, offering a huge boost to the economic competitiveness of the UAE and for protecting those who are unable to pay their debts for genuine reasons. The new law, which will come into effect next year, protects the debtors from legal prosecution, decriminalises their financial obligations, helps them with rescheduling their debts and provides them with the opportunity to work in order to service their financial liabilities. The lessons from the 2008-09 debacle have been well-learnt and, a decade later, the UAE has strengthened its financial fabric and the legal ecosystem to emerge as the ideal investment hub.
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