Major banks resume resident financing after COVID-19 block

• The list of jobs eligible for borrowing includes traditional roles like judges, doctors, healthcare workers, engineers, and teachers.

• The additional percentage ranges from ten percent to fifty percent, potentially increasing based on data. The prescribed loan cannot exceed the maximum limit set by the Central Bank of Kuwait for consumption, which is 25,000 dinars.

• There is a red list of jobs deprived of lending, topped by those exposed to Kuwaitization, specifically those in which the Civil Service Commission strictly obliges government agencies to appoint citizens.

Following a four-year ban on lending to non-Kuwaitis, major banks have shifted their strategy to allow such lending. This change reflects policy makers’ efforts to stimulate credit growth amidst individual financing slowdowns since 2023.

In this regard, Al-Rai newspaper learned from responsible banking sources that major banks circulated to their employees the news that they had lifted the ‘block’ on residents’ financing and once again opened the door to lending to them, which had been closed since the COVID-19 pandemic.

However, this shift is not entirely open, as the sources reported that the new trend is more restricted. This is due to considerations, the most important of which is that the client enjoys an end-of-service bonus, preferably not less than ten years, and works for a major, reliable company that is functionally and credit-wise stable.

According to the latest developments, non-Kuwaiti customers who work in government agencies and receive salaries starting at 250 dinars will be able to borrow.

For private sector employees, their salaries must not be less than 500 dinars, and they are also required to enjoy additional benefits, most notably an expansion of the end-of-service reward limits, which decrease as benefits increase. This is due to banking concerns about exposure to default risks in all scenarios.

List of jobs eligible for borrowing

The sources indicated that the list of jobs eligible for borrowing includes traditional roles like judges, doctors, healthcare workers, engineers, and teachers. Additionally, new clients encompass employees in cooperative societies, construction supervisors, journalists, administrators, technicians, and those in specialized professions, among others, who are similar in job type.

Customers who meet the conditions, specifically regarding the end of service, are entitled to obtain financing with an additional margin exceeding the value of the reward. This margin varies depending on the customer’s job, job grade, and job stability.

The additional percentage ranges from ten percent to fifty percent, potentially increasing based on data. However, the prescribed loan cannot exceed the maximum limit set by the Central Bank of Kuwait for consumption, which is 25,000 dinars.

Regarding installment limits, they are determined by the client’s solvency, including factors like salary, the size of the end of service reward, and whether the client has deposits.

Lending to expatriates

What increases the relevance of the banking development regarding lending to expatriates is that major banks have entered the competition in this sector.

Previously, financing was limited to medium and small banks that began lending to expatriates some time ago, with salaries starting at 300 dinars and less adherence to the end-of-service bonus condition. They only required a business continuity certificate for up to six months, likely increasing credit competition to attract non-Kuwaiti customers.

Additionally, the legitimate question arises: What new banking innovation has convinced major banks to transition from the established ban on lending to expatriates to opening the door to financing them?

In principle, it is clear that the conservative policy of these banks has not completely changed. The evidence is that they continue to restrict financing for this segment with conditions. However, the slowdown in credit portfolios, whether at the individual or corporate level, has motivated them to relax the ban they adopted since COVID-19.

As a preventive measure while operating within an acceptable risk ratio in banking, it is appropriate to allow financing for non-Kuwaitis. This is specifically for those who have an end-of-service reward equivalent to the value of their financing or close to its limits. This is provided that the employer is reputable and reliable in its continuity during the loan period, which typically does not exceed five years.

Kuwaitization

The sources pointed out that there is another consideration that prompted these banks to ease their restrictions on expatriates, the most prominent of which is the narrow space for competition among Kuwaiti customers. This is due to the largest segment of them facing credit restrictions for periods exceeding a year, as per the instructions of the Central Bank of Kuwait. These instructions require that, for scheduling, the customer be regular in paying at least about 30% of the number of installments. Additionally, the low rate of new recruits does not match the targeted credit growth rate of all banks.

The sources stated that banks strict in financing residents will base their actions on their outlook for the future. They will continue to be strict while financing government jobs that are exposed to Kuwaitization.

The sources explained that there is a red list of jobs deprived of lending, topped by those exposed to Kuwaitization, specifically those in which the Civil Service Commission strictly obliges government agencies to appoint citizens.