Credit card defaults were the main reason behind expats skipping the UAE without settling their debts in 2009, a new report has revealed.
A sharp rise in credit card-related skips was seen last year with 66 percent of all departures attributed to the problem, compared to just 30 percent in 2003, the report by Orion Analytics said.
Bank records analysed by Orion Analytics for the Skip Report shows that the reasons for skipping between 2000 and 2009 are linked with the increased issuance of credit cards, which started around 2003, Emirates Business reported.
"The sudden shift cannot be attributed to tightened bank lending policy, since the commercial banking sector did not reorient lenient lending policies till well into the recession, when both credit card and loan defaults rose in an unprecedented manner," said the report.
"Increased credit card activity, in fact, epitomised the boom years of the economic upswing. Banks set few conditions for extending the service and in most, a salary account was enough to issue credit cards," it added.
"The pattern shows that card issuance increased around 2003, and defaults started registering an increase the following year onwards," the report said.
"In hindsight, it is apparent that commercial banks' risk management worked on the assumption of guaranteed returns. Further-more, once the risk matrix failed, there was a visible failure on parts of banks to adjust lending policies in light of emerging market conditions," it added.
The report said that Indians, Pakistanis and Filipinos were the leading nationalities in terms of skipping, with Indian nationals being responsible for 26 percent of the total in Q3 2009.