Local banks broaden credit base, increase loan limits and tenure for retirees

• Banks are now allowing retirees to obtain consumer loans up to the regulatory ceiling of 25,000 dinars and housing loans up to 70,000 dinars, provided the applicant meets the conditions and controls set by the Central Bank of Kuwait.
• One of the key criteria in determining both eligibility and financing value is the installment-to-income ratio, which must not exceed 30 percent in line with regulatory requirements.
• For existing loans, retirees may apply for rescheduling at current interest rates, provided they meet early settlement conditions, which typically require the payment of around 30 percent of outstanding installments.

Local banks have raised the maximum age for loan repayment for retirees to 73 years, as part of their efforts to expand credit growth and diversify their financing portfolios beyond narrowly defined customer segments.

The move comes within broader plans to increase lending to retirees, effectively widening the customer base eligible for financing.

Banks are now allowing retirees to obtain consumer loans up to the regulatory ceiling of 25,000 dinars and housing loans up to 70,000 dinars, provided the applicant meets the conditions and controls set by the Central Bank of Kuwait.

According to the sources, under the maximum tenure standards adopted by some banks, a retiree can now extend loan repayment until the age of 73. The credit facilities available to this segment include various types of loans, most notably consumer, medical, and special-needs financing, designed to suit their age profile, reports Al-Rai daily.

The growing preference for financing retirees is driven by several factors, chief among them the increase in the number of younger retirees, particularly those aged between 40 and 50. In addition, retirees are Kuwaiti customers who benefit from financing incentives and often maintain deposits and diversified investments, strengthening their relationship with banks in the medium term.

The sources also noted that default rates within this segment remain limited and fall within safe and acceptable risk levels from both regulatory and banking perspectives.

Banks continue to prioritize customers with clean credit record and stable salary accounts, with minimal movement between banks. One of the key criteria in determining both eligibility and financing value is the installment-to-income ratio, which must not exceed 30 percent in line with regulatory requirements.

Based on average pension levels, the sources explained that if a retiree is 58 years old with a pension of 1,000 dinars, he is eligible to borrow 34,500 dinars, repayable over 15 years with a monthly installment of 300 dinars, assuming an interest rate of 6.5 percent.

This rate reflects the current discount rate of 3.5 percent plus the maximum margin of 3 percent permitted for banks.
For retirees receiving 1,500 dinars, financing can reach 51,500 dinars over 15 years with a monthly installment of 450 dinars.

Those with pensions of 2,700 dinars are entitled to borrow up to 80,200 dinars, with monthly installments of 810 dinars over the same period. In contrast, if the retiree is 72 years old with a pension of 1,000 dinars, the maximum financing falls to 3,475 dinars for a one-year term, with monthly installments of 300 dinars.

Banks open to lending to retirees also allow higher personal loan values for elite retired clients, particularly when additional guarantees are provided, such as deposits, real estate, or other collateral, to mitigate default risks.

For existing loans, retirees may apply for rescheduling at current interest rates, provided they meet early settlement conditions, which typically require the payment of around 30 percent of outstanding installments. Debt rescheduling after retirement is considered a facilitating measure for this segment.

With the expansion of retiree lending and the extension of the repayment age to 73, questions have arisen regarding risk protection in the event of the borrower’s death.

The sources clarified that banks expanding in this area insure their retiree loan portfolios at their own expense. In the event of the borrower’s death before full repayment, the insurance company settles the remaining balance, protecting banks from default risk and eliminating the need for separate approvals from customers.

The sources also highlighted that one of the main challenges banks face in lending to retirees, is their freedom to transfer their pension accounts from one bank to another without prior clearance from the lending bank. This weakens the lender’s ability to deduct installments directly from the pension and increases risk exposure.

Restricting the transfer of retirees’ accounts from the lending bank, in line with general procedures, would reduce banks’ sensitivity to financing this segment and limit legal pursuits, especially since pensions are considered one of the strongest guarantees in credit granting.

While retirees are entitled to transfer their pensions between banks, they remain subject to maximum credit limits, financing ratios, and installment ceilings, in accordance with data recorded by the credit information company “Cynet”, which all banks are required to review and apply when granting financing.