Ministry of Finance also announces creation of electronic registry to record assets to ensure project financing
Companies in the UAE, especially small and medium businesses, can now secure bank loans by using their moveable properties as collateral in order to help them meet their cash-flow needs amidst tough situation due to the pandemic.
The UAE has issued Federal Law No.(4) of 2020, which expands the scope of including more assets that can be used as collateral and through other amendments that improve enforcement in the case of defaults.
Generally, small businesses find it tough to secure bank loans due to their size and lack of financial history.
The law will also strengthen the UAE's competitiveness, ease of doing business ranking and attract more foreign direct investment.
Younis Haji Al Khoori, Under-secretary at the Ministry of Finance, also announced the creation of an electronic registry to record assets to ensure project financing. This register would allow the use of "tangible and intangible" moveable properties such as equipment and tools, receivables, cash flows, crops and others as collateral against obtaining loans.
He stressed that the law will have a significant positive impact on the nation's economy, as it caters to recent developments in the scope of movable properties.
"This law will improve the ability of financial institutions to expand lending operations, and regulate current practices associated with them. It also addresses the associated risks, and regulates the relationship between banks, institutions and companies, to ensure the rights of all parties," he added.
He pointed out that the provisions listed in this law cover most of the World Bank's indices included in the Doing Business Report.
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