UAE’s AECB brings out expense-to-salary ratio in credit reports

Al Etihad Credit Bureau
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By Shilpa Annie Joseph, Official Reporter
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Al Etihad Credit Bureau’s (AECB) credit reports will now include an expense-to-salary ratio (ESR), as it strives to provide greater insight into the creditworthiness of potential borrowers in the UAE by evaluating their non-banking monthly payment obligations.

The regulator said that the ESR will be indicated as a percentage ranging from zero to 100 and represent a person’s financial obligations as share of their salary. It will take into account active loan installments, credit card limits, and monthly telecoms and utility bills.

Marwan Ahmed Lutfi
Marwan Ahmed Lutfi
CEO -AECB

“Credit reports are a direct reflection of an individual’s appeal and payment behavior to lenders like banks and financial institutions but are also as important for other entities such as property managers and telecom service providers. The addition of the ESR to the AECB reports is a natural step in our ongoing path towards generating data-driven insight for lenders to assess the creditworthiness of individuals, while taking into consideration their regular non-banking monthly payment obligations, such as utility bills, and telecommunication bills. More so, ESR helps understand one’s affordability rating by showing the total monthly payment obligations reported to the bureau as a percentage of their reported salaries.”

Established in 2014, the bureau brings transparency to the lending industry by assembling a credit record of the UAE’s financially active residents. It collects data such as loans, mortgages, credit cards, and phone bill payments.

“An individual’s credit report documents their entire credit history in the UAE, showing the credit cards, loans or other finance products they have signed up for, along with their payment behavior,” as per the reports.

The new ratio will indicate a potential borrower’s total obligations as a share of their reported monthly salary. The feature will serve as an “additional parameter in assessing creditworthiness and affordability for individuals and banks alike,” the credit bureau said.

“ESR does not only provide banks and credit report users with insight on the individual’s spending behavior but is also a barometer for individuals themselves that will allow them to gauge their own spending habits and – hopefully – consider a more financially responsible alternative should their ESR be less than ideal,” added Mr. Lutfi.

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