Sunday, November 09, 2014

Bank Debts in Qatar

Continuing on from my post about Qataris being in significant debt The Peninsula newspaper had a front page story on alleged biases in bank lending and how many Qataris are over-borrowing from banks.

Much of the article is about how banks appear to be very conservative in their lending to expats and not loaning money to people who even have good credit histories and salaries. I'm not going to comment much on that part of the article. Banks have to be careful about loaning money to expatriates who can quickly abscond with the funds. Loans typically are collateralized, such as the bank having a lien on a home because of a mortgage. I'm not sure about the personal loans mentioned in the article as to whether they can be collateralized or not. This article does mention that some ex-pats have managed to flee the country after getting the loan, which would make banks even more shy about personal lending.

Though the big surprise for me was just how much personal debt there is in the Qatari population. The article cites a figure for October 2013 of QR38.1 billion in personal loans to Qataris. That’s about US$10.4 billion! If the Qatari population is around 230,000, that works out to an average of QR 165,600 (US$45,000) for each man, woman and child. Just personal loans, I don’t think that includes mortgages. It means on average a Qatari family of 5 would have $225,000 in personal loan debt. That’s a lot of debt. I sure hope that figure includes car loans or the debt levels are truly frightening as many Qataris also purchase vehicles on credit. Not surprisingly the default rate is going up and now there are many bounced cheque cases going to the courts (in Qatar as in many other Middle Eastern countries there is no such thing as declaring bankruptcy, if you can't pay your debts you might go to debtor prison).

Again it provides evidence that not all Qataris are rich despite the stereotype. Unfortunately I think many are under pressure to "keep up with the Joneses" and thus go heavily into debt to keep up appearances and look like they on the same income level as their wealthier friends and colleagues. I'm glad the Central Bank is trying to clamp down further on this issue but it may have farther to go (really, can any Qatari get personal loans for over 1 million riyal? That’s a LOT of money. A young Qatari is going to struggle to pay that back.)

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