ATMs, SWIFT and wire transactions, credit cards, loans, savings and all the other “electronic” banking transactions exist. They are features of Dubai's Citibank, HSBC, Lloyds Bank, ABN Amro, Barclays, Dredsner German Bank and a whole host of others, but the expatriate concept of a “local bank” is not correct. It is local only to the UAE (or the Middle East) and usually has branches around the country. It may also have affiliations with larger international banks.
Laws
Banking laws in the UAE, while different, are quite strict. Money laundering, illegal transfers and criminal activity is controlled as well as anywhere in the Western world. When it was discovered the funds of the 911 hijackers were transferred through Dubai, the government became much more strict.
Leverage
Banks are not leveraged nearly as much as they are in the West (especially the USA.) In order to receive a banking license an institution must not only have the collateral, but also be socially responsible. The institution must have a number of Sharia compliant programs available for people. Muslims are not allowed to charge interest nor have anything to do with the concept. This is diametrically opposite to Western banking principles, therefore programs have to be in place to allow Muslims to partake – it works for both parties.
Credit
A nod and a hand shake can finance a million dollar house. A wink can get you 3% interest on a new Cadillac. No matter how large the bank you WILL know your banker. There are no credit agencies as in the West. Companies like TRW (Experian,) Trans Union and Equifax are not welcome in Dubai. Considered impersonal, inconsiderate, and too powerful, the people of Dubai simply feel that it is not their job to “…stay on top of your credit reports.”
Check Books
The UAE is a fairly large cash society; with a difference. Credit is with checks. Bills are paid by an automatic system (revolving bill payment) individually online, via numerous cash machines throughout the country or in person (offices stay open to as late as 10PM.) In the West, as in the UAE, people do not go to jail for failure to repay a debt. The West has a policy to harm you for years (on your credit score) yet they do nothing to repay the lender. In Dubai it is different in that the borrower goes to jail and is required to repay the debt. Then they can borrow again properly.
Being in debt is not illegal but writing a bad check is (as in the West.) When a lender loans money they require you to write them checks for the amount of the loan. Don’t repay, they present the check; do not pass go, go directly to jail. The terms are fair and once the debt is repaid all is forgiven. It is assumed you learned the lesson and you can borrow for what you need again from all banks.
When making a revolving purchase like a car loan, the banks will require you to write a check for each monthly payment. Miss a payment and your banker will call you and arrangements are possible, but lie to him and go to jail. Not a bad system for all concerned, but it takes some getting use to.
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