UAE allows movable assets as collaterals for bank loans

By Rahul Vaimal, Associate Editor
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City of Dubai
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UAE companies’ especially small and medium-sized businesses can now secure bank loans by collateralizing the movable assets to meet the financial crisis due to the COVID-19 pandemic.

The UAE has issued Federal Law No. (4) of 2020, will now enable enterprises to include more assets that can be used as collateral and other amendments that improve implementation in terms of defaults.

The law will help strengthen the UAE’s competitiveness, business ranking and attract more foreign direct investment.

Due to the size and lack of financial history, most of the small businesses are in difficulty to obtain bank loans.

Younis Haji Al Khoori, Under-secretary at the Ministry of Finance, announced the development of an electronic registry to record the list of assets, to ensure project financing.

This register will allow “tangible and intangible” movable assets such as tools and equipment, receipts, cash flow, and crops as collateral and help the business people rise from the hardship of pandemic.

Mr. Khoori stated, “This law will improve the ability of financial institutions to expand lending operations, and regulate current practices associated with them. It also addresses the associated risks, and regulates the relationship between banks, institutions and companies, to ensure the rights of all parties”.

He also pointed out that all the provisions listed in the act cover most of the World Bank’s indicators contained in the Doing Business Report.

“This law will have a significant positive impact on our nation’s economy as it caters to the recent developments in the scope of movable assets,” Mr. Khoori concluded.