Examining Dubai's borrowing culture
Published: Fri 28 Aug 2015, 12:00 AM
Last updated: Fri 4 Sep 2015, 11:15 AM
They say one of the quickest ways to lose a friend is to ask them for money (there's an off chance that it works on relatives too!). But when friends or colleagues come a-knocking, asking for a loan to help tide them over the month's bills, most of us are willing to lend them a little money. A couple of hundreds here, a Dh50 there, and the occasional big amounts, too. But what happens when the borrowing continues, and these friends don't pay you back? And is there any legal recourse you can take? In fact, several expat forums in the UAE field questions from residents on what they can do to get back money lent, anything from a few thousand dirhams to several hundred thousand.
Well, it turns out that there's little one can do to reclaim debt owed - especially when it's money lent, in cash, between friends - according to Ashish Mehta, founder and managing partner of Ashish Mehta & Associates law firm in Dubai. "What I advise people to do is to make a written agreement when lending money, stating the interest terms and a payment plan. And the best practice is to lend money using a cheque, which will serve as evidence." Ashish adds that in the absence of a written agreement, one can also present to the court two witnesses who can corroborate the loan given to a friend, relative or colleague. "Without these things, the case would be rejected in the court and you will have no legal recourse. One should also keep in mind that, in the UAE, anyone not authorised by the Central Bank is not allowed to give loans to people, whether it be interest-free or not."
But most people will not resort to such methods, and some, like Dubai resident Harriet, think it's an overly drastic measure when money changes hands between friends. That doesn't mean the Aussie expat doesn't take her own precautions, as she's learnt from past experiences. "I remember lending money to a friend for some expenses and my own rent payment was approaching. The worst part was that I had taken some money on my credit card to compensate for the money I'd lent. So those bills were due as well and I was in real trouble, with late fees and extra costs. Since then, I've been very careful when I lend money and to whom."
Harriet admits that she's not very disciplined with money - "I don't budget, and I know I should," she says - but she usually plans for the bigger expenses like rent. "I understand, like most of us here, that rent payments are always hard and we tend to help out our friends, especially when they're a little short on their payments. But whenever I borrow money from someone, the nagging concern of having to pay them back as soon as I can is always at the back of my mind." She says that it's hard to ask friends to pay you back, and particularly demeaning when you have to make up excuses to ask for your own money. "I find myself making up excuses or justifying why I need my own money back. I think people should just return money due, without making their lenders ask for it. But I don't think I would go through with making them sign an agreement, especially since it's cash."
She feels that since most people living in the UAE are expats, they can't turn to their families for money as quickly as they can scrounge off friends. "I think we all need to budget more - it's very important to be financially sound in the UAE. Now, when friends ask me for a loan, I always ensure I get them to follow a plan to pay me back."
But what happens when the amount is over Dh100,000 and you have a business to run? That's what happened to Avinash and he's still reeling from his losses. "I had one of my father's old friends borrow Dh120,000 from my family and he quickly vanished. We thought it was a genuine case and he really needed help, so we loaned him the money," says Avinash. "The stories people tell you range from things like sick children in hospital to bizarre family crises, so it's difficult to judge who you can trust. Most of the time people will not pursue any legal action because the time and effort involved is an extra financial burden."
He concurs with Harriet's view that since most people are expats and, by nature, living temporarily in Dubai, they will tend to borrow money from friends and acquaintances to help make ends meet. "In Dubai, people are very generous - maybe because they understand the struggles themselves. It's not uncommon for friends to lend each other money, but it's important that they realise their friends also have expenses so they should pay them back without being asked. It should be proactive. The most important thing," adds Avinash, "is to remember that you have a right to ask for your money back. Don't worry about the social decorum," echoing Harriet's views on the matter.
"One thing I've noticed is that people are happy to spend others' money before spending their own," says Salem, who works as a commercial driver in Dubai. He is part of a community where micro lending amongst friends and colleagues is a normal practice. Yet, he says, it's also part of a terrible habit. "People don't want to spend their money. Even if people have money, they will still borrow from a friend to cover some expenses and pay it back slowly. It's a very strange behaviour," he observes. Nevertheless, Salem himself benefited from this micro lending system when his uncle passed away recently. "My friends had collected Dh5,000 for all my expenses. I didn't even know who gave what amount. But I made sure, when I came back, to pay each and every person back."
Salem, and others like him, tend only to lend money to those from the same town or village. "I understood this some years ago, when someone from my town approached some of us for money and then left Dubai. His visa was not renewed, so we had a tough time getting the money back. But because he was from the same town in Karachi, I was able to get my share back. I wouldn't lend money to someone from a place I'm not familiar with or have no ties to, because I may end up not being able to track them down. I think that is the common practice among many other south Asians here too," he notes.
It's sort of a safer bet than lending to complete strangers. "I never lend money to anyone I don't know very well," says Salem. "Most of the people who do ask for temporary loans do give them back, especially those with genuine cases." The reasons vary, he says, with people asking for Dh50-100 for petrol to asking for money to help pay deposits for visas to the UAE, which amount to Dh10,000. "Sometimes they need money because their child is sick and they have to take them to the doctor, or buy medicines, or send extra money back to their home countries to take care of expenses," he adds. "But, I'm very careful who I lend to." He also cautions others in Dubai to be wary to whom they lend money to, and to always keep a record.
rohit@khaleejtimes.com
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