Kuwait Banks Set Stringent Rules for Expat Loan Approval
In a noteworthy shift, local banks in Kuwait are streamlining their job preference list for lending to expatriates, focusing on sectors like education and healthcare. Sources reveal that the updated list now prominently features professionals in these fields, such as doctors, nurses, and technicians, as well as individuals in elite positions where competence is a key factor. This preference extends to stable government jobs and positions unlikely to face competition from Kuwaitis, aligning with nationalisation policies.
Banking sources highlight a strategic shift towards customers with high-quality credit records and substantial end-of-service benefits. The focus is on individuals with stable jobs, emphasising a reluctance to grant loans to newly appointed expatriates. Consumer loans are capped at 25,000 dinars for non-Kuwaitis earning around 1,250 dinars with over 10 years of continuous service.
The banking policy reflects a growing appetite for low-risk ventures, resulting in a hesitancy to accept unstable financing. Banks are increasingly selective, with limitations on loans for newly appointed expatriates and stringent criteria for employees over 55 years old with low salaries and non-university educational certificates.
Interestingly, there has been a significant decline in loans to expatriates in the government sector over the past year. Banks attribute this to the reduction in non-Kuwaiti appointments in government jobs in 2023 and the prioritisation of appointments for citizens.
This cautious approach to lending has contributed to a slowdown in the overall growth of Kuwaiti banks’ loans. EFG Hermes estimates a meagre 4 percent annual growth and 1 percent quarterly growth for the fourth quarter of 2023, placing Kuwaiti banks below the expectations set for Gulf banks.
Sources anticipate the sluggish credit growth for non-Kuwaiti individual loans to persist until at least the end of the first quarter of this year. With most banks adopting stringent credit policies, the question arises: who is willing to lend to newly hired and middle-income expatriates?
According to sources, about 4 out of 10 banks are more open to financing expatriates on favourable terms. These banks face stiff competition for the Kuwaiti segment, and to fuel their growth plans, they turn to the expatriate sector, capitalising on the limited credit space for Kuwaitis. These banks are willing to wait for customers to switch banks, as required by the Central Bank, after 30 percent of the repayment period has passed.
For banks struggling to gain market share in the Kuwaiti retail sector due to intense competition, lending to expatriates becomes a viable alternative. Market studies indicating a manageable default rate among expatriates drive these banks to expand their lending portfolios, even as they maintain general principles for good individual lending.
While these banks insist on certain criteria, such as a well-known employer and known history, they are comparatively more lenient in terms of years of experience, salary rate, and end-of-service bonus size. Expatriates with salaries exceeding 300 dinars can secure loans, even with just four months of employment, adhering to the legally required stabilisation period. These banks enhance their protective measures by adopting a broader list of companies compared to their conservative counterparts.
