How Online Loan Aggregators contributing to Retail Loan Penetration in UAE?

The banking industry in UAE is a highly fragmented space with a presence of ~60 national & international banks in the country. Post-2016 oil crisis, suffering from high NPAs banks in UAE tended to be more cautious when lending particularly to corporate & individuals thereby increasing rejection rates. Even now, banks generally avoid lending to ex-pats (sometimes putting additional eligibility conditions) & prefer to provide loans to Nationals working in government jobs. Therefore, ex-pats (8.5 Mn population) are often seen resorting to loan aggregator channels.

The Retail Lending Landscape in the UAE

Retail loans including personal loans, credit cards, mortgages/home loans, car loans are the second most demanded loan category in UAE. In past years, personal loans outstanding in UAE have been gaining momentum owing to increased working population demand from Dubai & Northern Emirates regions. With minimal documentation & eligibility criteria, personal loans in the UAE are majorly acquired for the purposes of house renovations, travel, paying off other loans, etc.

However, given similar documentation & eligibility criteria, one must expect a similar trend to be followed in credit cards demand as well. On the contrary, credit card transactions have been falling owing to limited Merchant’s Banking Infrastructure availability and making credit card usage limited & challenging.

Key Factors Driving Consumers to Online Aggregators

Attaining a home loan in UAE is a costly & time-consuming process, therefore consumers often take online aggregator services to either compare loan prices or get assisted in the overall loan acquisition process. This is particularly relevant as property prices in the UAE have been following a downward trend reaching an average price of AED 2.58 Mn by 2019 and shifting from investor-led market to the owner-occupied market.

In the automotive sector, car dealerships often have tie-ups with multiple banks thereby helping purchasers in loan facilitation & charges negotiations which is one of the major reasons for consumers to not preferring online aggregator services. This occurs while consumers have been shifting to alternative options such as car leasing, car subscriptions, or purchasing used cars, which has decreased the country’s year on year car sales.

Major Companies in the Online Aggregator Ecosystem

• YallaCompare
• Souqalmal
• BankOnUs
• Policy Bazaar UAE
• SoulWallet
• UAE Cash Loans

Potential Growth Areas: SME Loans

SME loans can be a high potential area for online aggregators. According to Dubai SME Report of 2018, 400 thousand MSMEs contribute ~40% to the GDP and employ 42% of the city’s workforce. However, owing to credibility issues & failing to meet collateral requirements, SMEs in The UAE suffer from a 60-65% rejection rate; therefore, they are often seen to rely mainly on self-funding options or on aggregators for loan facilitation.

Market Transformation and Future Outlook

COVID 19 pandemic has made industries realize the importance of online operations and has brought in major shift in consumer behavior with consumers preferring contactless online services. Such a situation is expected to act as an opportunity for online loan aggregators thereby expecting tremendous growth through increased traffic & leads.