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Special Report: A matter of life & debt
Special Report: A matter of life & debt Dhanusha Gokulan / 26 September 2013 Financial insecurity is a major concern in the UAE, where 50 per cent residents reportedly do not have a savings plan and many face a barrage of texts, e-mails, and calls from their debtors. Khaleej Times delves into the scenario where a few payment lapses make banks turn into a person’s biggest nightmare and comes up with experts’ advice on how to escape the debt trap. When A Ferns (real name withheld to protect his identity) arrived in Dubai from India seven years ago, he had a frugal family background. “My parents taught me to live within my means,” says the 27-year-old. “There was never any talk of loan, credit cards, or mortgage at home. So when I came to Dubai, I was like a kid in a toy store.” In 2006, his salary was Dh12, 000. In less than two years, he had amassed a debt of Dh175, 000. “There was a car loan, three credit cards, and a personal loan. At the worst possible time my ex-wife filed for divorce, so I had a monthly alimony to send home as well. By the end of 2008, I had lost my job and had a total debt of Dh200,00.” When he began contemplating selling his ancestral land in South India, his father intervened. “My dad paid off a huge chunk of my loan. It was one of the most humbling moments of my life when he had to issue a cheque (handing over) his retirement savings.” However, by mid-2009 he had got another job and swore to pay every penny back to his father and most importantly, to live within his means. “My mistake was that I got carried away and I wanted everything. A big car, a villa in Jumeirah, the latest in gadgets, just everything … “But the worst mistake was that I did not bother with the terms and conditions of my loan repayments. In most cases, I did not even know what the interest amount was.” Ferns is among thousands of UAE residents plagued by the “debt problem”. Almost 50 per cent of UAE residents do not have a savings plan and financial insecurity is one of their biggest concerns, says a survey by research company YouGov. This is not surprising, given the Central Bank and banking institutions reporting a record surge in consumer debt in the UAE this year. Personal borrowing hit more than Dh270 billion in the first five months of this year, and experts say the root cause of the problem is poor financial literacy and easily available credit. Rana Zeeshan Saleem, head of retail asset and KSA retail, Emirates NBD, told Khaleej Times that demand for credit has increased across all categories. “From January to June 2013, there has been a 50 per cent increase in the demand for loans. Car loans have gone up, home loans have gone up, personal loans have gone up. “People take loans for medical reasons, home renovation. There is an increase in demand across the industry in all categories,” says Saleem. Credit card rates range from 34 to 36 per cent and personal loan rates fluctuate from 6 to 8 per cent. “Currently, banks have little or no record of the payment history of an individual; (so) regulating loans becomes a task,” he adds. However, the Central Bank is now planning to introduce a bureau that will keep track of residents’ financial history. Bhairav Trivedi, chief executive officer at Network International, a payment solution provider in the Middle East, says the card market in the UAE has grown 15 per cent in the last six to seven months. “Though there is not much transaction in the real estate market, there is a lot of usage of cards for traditional payments, such as (for) hospitality (hotels and restaurants) and duty free shopping. And now there is an upsurge in the purchase of fuels as well.” How the addiction grows Those who have recovered from debt or are still stuck indicate lack of financial literacy and consumerism are the prime reasons for heavy borrowing. Car loans, personal loans, and credit card dues are the most common loans for which expatriates approach banks. Beating debt UAE Saves Week, organized by www.cashy.me, is a week-long community initiative launched on Sunday to enable people to improve their financial health. The YouGov survey of 1,011 residents to assess attitudes and responsibilities towards money management confirms that financial concerns and debt are the biggest causes of stress among residents. More than a third (34 per cent) said this. Of them, 57 per cent stated they have a long way to go before becoming debt-free. However 55 per cent of this population is ready to make lifestyle changes to get out of their current situation. Perhaps the most worrying find is that more than 60 per cent of the respondents would not be able to survive for six months if cut off from their current source of income. Another 15 per cent said they had no savings whatsoever. According to Nima Abu-Wardeh, founder and CEO of www.cashy.me, financial literacy is what people need. “We launched UAE Saves Week with the objective of helping people take the first steps towards saving money and hopefully, to continue to practise these lessons for the rest of their lives,” she says. “People must learn to live within their means. Financial stress affects every single aspect of our lives. We need to make this a part of public discourse and encourage people to take baby steps.” UAE Saves Week UAE Saves Week brings a series of themed challenges designed to motivate and empower people to manage their finances more responsibly. The themes are Savings Sunday, Pack Your Lunch Monday, Green Tuesday, Wise Up Wednesday, Get out of Debt (GOOD) Thursday, Frugal Friday and Stick With it Saturday. Green Tuesday, for example, aims to improve awareness of the economic benefits of going green. Get out of Debt Thursday teaches people to live within their means and urgently tackle debt, a pressing and growing concern in this region. Stick with it Saturday brings the event to a close by encouraging people to take one simple pledge and sticking with it, even if it is as small as setting aside Dh1,000 every pay day. For details go to www.cashy.me/uaesw/ Experts say taking loans to pay off another loan is no solution. “It might be a temporary fix but you will end up borrowing more,” says Kenyan Evans A Oduya. “My brother was stuck in debt for the entire time he lived in Dubai. He had six credit cards and two personal loans from the bank. He lived way beyond his means for two years, till the credit card debt finally caught up with him. He spent four years repaying loans and eventually left Dubai saying he had no savings.” Augustine C (name withheld to protect his identity), a Filipino national, needs to repay a Dh100, 000 loan he took to purchase a car and now “kind of” regrets. “My monthly salary is Dh11, 000 and my wife’s income is Dh4, 000,” he says. “I spend Dh5,000 every month repaying loans, Dh1,000 goes into my kid’s education and I also pay a Dh28, 000 rent. Electricity, telephone bills, grocery bills, and an occasional outing with the family are the other expenses. It is difficult to save with all of these expenses. “Now I think I should’ve bought a second-hand car instead. I would have been able to save some money.” Several residents, overburdened with debt and unable to cope with the stress, took severe steps like suicide. Jamal (name changed on request), the head of a family of four, has loans of over Dh150, 000. His monthly salary is Dh7,500. “A major chunk of my salary goes in repayment of loans, credit card bills and school fees for the kids,” he admits. “I sent my son back to India because education there is much cheaper. My wife babysits to earn some money. Sometimes, I get very depressed wondering if I will ever get out of this rut. But I need to keep fighting for my family.” Jamal calls credit cards an addiction: “Because they are so convenient, people like me use them on a day-to-day basis to make ends meet.” Rupert Connor, a partner at Abacus Financial Consultants who has been living in the UAE since 2002, says there is very little incentive for people to save here though the government doesn’t provide any kind of pension. “This is a tax-free environment,” Connor says. – dhanusha@khaleejtimes.com Make your money last Financial gurus give Khaleej Times tips on how to slash debt. Rama Chakaki, founder of BarakaBits, a website that focuses on business, the environment and other themes in the Middle East, says people need to be made more aware of the ramifications of debt. They also need to be provided with alternatives. “People now have an insatiable appetite for stuff which tends to tie us down,” she says. “They must learn to enjoy the simpler things in life like health and natural environment.” Rama’s insights on beating debt > Sit down with your family or whoever you are responsible for and draw up a financial plan that matches your income > Save for a rainy day while living comfortably > Prioritise > Rule out impulsive buying > Resist advertised temptations > Watch movies that show you how we are manipulated by the marketing industry > Surround yourself with people from the same culture > Stick around sensible people and educate yourself > Read all the conditions before getting into a financial contract > Do not write post-dated cheques > Communicate with your debtors and draw up a clear plan of action with them > Use the metro and bicycle > Lead a simpler life Rupert Connor, partner at Abacus Financial Consultants Be careful before jumping into any commitment with financial consultants. “A male, single and with no dependants, must save minimum 5 to 20 per cent imum of his income for five to 10 years. “Before you sign up with a consultant, you need to get a referral. I personally would never do business with someone who phones me up and suggests I need a financial advisor. “Do your research before meeting someone and take about six to nine months before signing up for anything,” Connor adds. Connor’s six steps to financial stability > Set goals: For example, you may want to retire at 55 or keep aside funds for your children’s private education > Find out about your finance prospects, investments, family commitments, ambitions and plans > Analyse your current financial situation and squaring it off with your aspiration > Construct a financial plan. And once you decide what you want in the future, draw up a programme to make your goals possible > Implement strategies: You could put a will in place and start saving for your retirement from the age of 25. It will come out to be much cheaper as compared to when you are older > Monitor and review: Conduct a regulatory review, assess your situation and adjust your plan accordingly. Check with your advisor on how your funds are doing and meet with the advisor every six months at least. Continue reading
Samsung to launch ‘curved display smartphone’
Samsung to launch ‘curved display smartphone’ (AFP) / 25 September 2013 Samsung said on Wednesday it would unveil a smartphone with a curved display in October — a technological innovation aimed at maintaining its lead in a lucrative but increasingly saturated market. Curved displays are at a nascent stage in display technology which is shifting towards flexible panels that are bendable or can even be rolled or folded. “We will introduce a smartphone with a curved display in October,” Samsung mobile business head of strategic marketing D.J. Lee told reporters. He declined to give more details. Samsung — the world’s top maker of smartphones and TVs — unveiled prototype products with a flexible screen in January. But it still faces a major challenge in making other handset components — such as batteries — that can bend with the rest of the unit. Curved displays are already commercially available in large-screen televisions offered by companies including Samsung and LG. The displays are supposed to offer a more immersive viewing experience but are significantly more expensive than standard screens. In another attempt to break new ground, Samsung unveiled earlier this month a smartwatch called Galaxy Gear, which can take photos and videos, make or take phone calls, or check e-mails. Wearable computing, including Google’s smart glasses, is considered the next frontier in consumer electronics following smartphones. The watch received some scathing reviews, along with complaints that it only worked in conjunction with Samsung’s latest oversized smartphone, the Galaxy Note III. The Gear and the Galaxy Note III will hit stores in some 140 nations by the end of October, and Samsung executives said they were confident the critics could be won over. “We received so much criticism when we first unveiled the Galaxy Note series…but it has created a whole new market segment for oversized smartphones,” said Lee Young-Hee, executive vice president of Samsung’s mobile unit. D.J. Lee said the watch would be made connectable with other Samsung devices such as the flagship Galaxy S3 and S4 smartphones by the end of December. Continue reading
More than 200 killed in Pakistan quake, tremors felt in UAE
More than 200 killed in Pakistan quake, tremors felt in UAE Faisal Aziz in Karachi and Sajila Saseendran in Dubai / 25 September 2013 Pakistan’s military on Wednesday rushed to reach the scene of a huge earthquake that killed more than 230 people and toppled thousands of mud-built homes when it hit the country’s southwest with enough force to create a new island off the coast. Officials said 238 deaths had been confirmed so far, 208 in Awaran district, and the toll is expected to rise as rescue teams reach more villages in the remote area. Met officials said that the magnitude of the earthquake was 7.7 while US Geological Survey put the magnitude at 7.8. The epicentre of the earthquake was in Khuzadar, a city in the Balochistan province, at a depth of 15km, the USGS said. The massive 7.7-magnitude earthquake that jolted Pakistan’s Balochistan province on Tuesday has created an island off the coast of Gwadar port, a media report said. According to officials, the island – about 200 metres long, 20 metres high and 100 metres wide – emerged soon after the earthquake, Dawn reported Wednesday. ”The island popped up soon after the earthquake. Our staff stationed in Gwadar has reported that the island is about one and a half km away from the coastline,” the report quoted Asif Inam, principal scientific officer of the National Institute of Oceanography (NIO), as saying. ”The island appears to be about 200 metres long, 20 metres high and 100 metres wide. But all this information needs to be verified scientifically,” he added. An NIO team would visit the site this week to gather further information, the report said. The earthquake struck Awaran and its neighbouring districts at 4.29 p.m. Tuesday. The Pakistan Meteorological Department said that several aftershocks, including one of 5.9 magnitude, were recorded following the major quake and strong tremors were also felt in south Sindh and east Punjab provinces of the country. A new island appeared after Tuesday’s quake close to the Pakistani coastline at Gwadar, officials said. “The island, which is up to 100 feet high (30 metres) and 200 feet wide, surfaced after the earthquake hit parts of Baluchistan,” senior local administration official Tufail Baluch said. He said a similar island had appeared at the same place in the sea about 60 years ago but disappeared after some time. The earthquake was felt in many cities across the two provinces, including Karachi and Hyderabad, but most of the damage was reported in the Awaran district of Balochistan. UAE residents in high-rise buildings also felt the quake. Staff at some offices in the Jumirah Lake Towers, Dubai Media City and Tecom areas reported that their buildings shook slightly shortly after 3.30pm. “It was not as bad as last time…but everybody on our floor really felt it,” a staff on the 18 th floor of a building in Tecom said. Some people also took to Twitter to report the tremor. Rakan S Alhamad tweeted: #Earthquake in #Dubai is happening right now! We felt it in JLT. Another Twitter user Captain Penfold referred to the quake as a “small wibbly-wobbly tremor”. Mohammed Mahmoud Mashroom, director of the Survey Department in the Dubai Municipality, which operates a local seismic network, said the quake could have been felt by a few people who live on tall buildings in Ras Al Khaimah, Sharjah and Dubai as mild shaking. He said the intensity of the tremor here would be as little as two or three degree on the Mercalli Seismic Intensity Scale which does not cause any damage and is not generally felt by all. In Pakistan, Balochistan Chief Minister Dr Abdul Malik Baloch imposed emergency in Awaran, where provincial government and rescue officials said dozens of mud houses had collapsed, and that the casualties may rise further. Military as well as civilian officials were busy in rescue efforts but the pace was slow due to the remoteness of the affected areas, officials said. Major-General Asim Saleem Bajwa, Director-General of the Inter-Services Public Relations, said 300 soldiers were busy in rescue efforts. “(The) strength will grow to 1000 by late morning. 40 deaths being reported from area,” he said on his Twitter account. “Khuzdar will be the base for rescue effort. Night flying helicopters with medics on their way. CMH Khuzdar alerted,” he said in an earlier tweet. No loss of life or property was reported from other cities, though Chief Meteorologist Muhammad Riaz said the “earthquake was major” and that destruction was likely. Officials, however, said losses would be limited because of the sparsely populates areas. Baluchistan is Pakistan’s biggest province in terms of area but smallest in terms of population and also the poorest. This is the second time this year that a heavy quake has jolted Pakistan. In April this year, more than 40 people were killed and thousands of people affected in the Baluchistan province in a 7.8 magnitude earthquake. The effects of that quake were also felt as far as Karachi, just like on Tuesday. In the country’s commercial capital of Karachi, people were forced to evacuate building and stand on roads after the quake struck, but no damages were reported. Hundreds of people could be seen standing on the I. I. Chundrigar Road, the city’s main business hub which houses the main offices of banks as well as many media groups, as people rushed out of their buildings to avoid damages. “I felt as if someone pulled my chair, but when I looked around, I realised that my colleagues have also felt the jolts,” said banker Rizwan Akhtar, as he stood outside his office with dozens of others. Most of the offices, especially the high rise buildings, were evacuated as a pre-emptive major in case of any aftershocks. The worst earthquake in Pakistan was in October 2005, when more than 73,000 people were killed and millions of people left homeless in a 7.6 magnitude earthquake that affected the Pakistani side of Kashmir and many cities of the Khyber Pakhtunkhwa province. The quake was probably the worst natural disaster to hit Pakistan and also ranks amongst the worst anywhere in the world. – news@khaleejtimes.com Continue reading
