AED 20.6 billion growth in trade financing during the year

The Central Bank revealed that the value of bank financing for trade activities, including wholesale and retail trade in the country, increased by AED 20.6 billion in one year, as it increased from AED 142.2 billion at the end of March of last year, to AED 162.8 billion at the end of the same month of this year, reaching its highest levels ever, while these financings witnessed an increase of AED 8.5 billion during the period from the end of last December to the end of March 2024.

The latest report of the Central Bank, which is issued on a quarterly basis, showed that wholesale trade financing in the country amounted to 117.8 billion dirhams at the end of last March, compared to 100.6 billion dirhams at the end of March 2023, an annual increase of 17.2 billion dirhams, and compared to 110.8 billion dirhams at the end of last December, an increase of seven billion dirhams in three months, while bank financing for retail trade amounted to 45 billion dirhams at the end of last March, compared to 41.6 billion dirhams at the end of March 2023, an annual increase of 3.4 billion dirhams, and compared to 43.5 billion dirhams at the end of last December, an increase of 1.5 billion dirhams in three months. According to the Central Bank, trade financing, both wholesale and retail, witnessed a continuous increase during the year, as it rose from 142.2 billion dirhams in March 2023 to 145.6 billion dirhams at the end of June 2023, then to 146 billion dirhams last September, and then continued to rise to 154.3 billion dirhams at the end of December 2023, then to 162.8 billion dirhams at the end of last March.

In addition, retail trade expert Ibrahim Al-Bahr said that trade, in both its aspects (wholesale and retail), is one of the profitable economic activities in the country, pointing out that commercial activities in general have witnessed significant growth during the recent period, which encouraged banks to increase the financing provided to them.

Al Bahar added that this growth in wholesale and retail trade has prompted many commercial centers to start new projects, build new centers, expand existing centers and increase branches, which required new funding to meet this growth. He explained, for example, that one of the major commercial groups in Dubai had 11 branches in 2014, but it was able to increase the number of its branches by more than 100% within 10 years.

He pointed out that the volume of financing for wholesale trade is greater than that provided for retail trade due to the nature of this trade, which requires high financing. Also, the wholesale trade activity is considered somewhat new, and therefore requires more financing, in addition to the fact that the profits of wholesale trade are greater than retail trade.

For his part, financial and economic expert, Amjad Nasr, said that the UAE has established its position as a major regional and global center for global trade, pointing out that many commercial activities that depend on export and re-export need continuous financing.

Nasr added that banks are constantly monitoring the market movement, as well as the movement of various commercial, industrial, real estate and other sectors, and accordingly direct part of their financing to the most prosperous and vital activities, as well as those with appropriate profitability.

He pointed out that banks are keen to diversify financing for various economic activities, so that all financing is not directed to one sector only, within the framework of their policy to reduce risks. Banks are also concerned with giving priority to financing sectors that have a lower degree of risk, good profitability, and achieve continuous growth.

Nasr explained that the financing of the wholesale sector is greater because the financing operations are carried out for large traders who enjoy high financial solvency and large cash flows, and carry out large import operations and sales to retailers.

He stated that the wholesaler also has a large group of customers, and therefore the degree of risk is less because it is distributed among a large number of customers even if one of them defaults, pointing out that the retailer sells to the final consumer who pays with credit cards or cash, and therefore does not need much financing unless he wants to expand and build new branches, and therefore the amount of financing he needs is less than wholesalers.

mutual interest

Retail trade expert Ibrahim Al-Bahr said that banks study the financial situation well before financing, to determine the financing amount and its conditions, stressing that this is in the interest of all parties, as the bank ensures the recovery of its money and benefits from the financing benefits, and at the same time the merchant can pay in easy installments, achieve growth in his activity, and compete in local and global markets.