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INFO RUEHZM/GULF COOPERATION COUNCIL COLLECTIVE

C O N F I D E N T I A L DOHA 000055 
 
SIPDIS 
 
E.O. 12958: DECL: 02/02/2020 
TAGS: ECON EFIN QA
SUBJECT: QATARI PERSONAL DEBT: MANAGABLE - FOR NOW 
 
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(C)KEY POINTS 
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--Despite significant efforts by the Government of Qatar 
(GOQ) to increase liquidity, banks are tightening credit in 
novel ways, especially for loans to expatriates. 
 
--Personal debt, although high by Western standards, does not 
yet appear to pose a threat to Qatar,s financial system. 
 
--Islamic banks appear to be in better financial shape than 
those in Qatar using the Western model. 
 
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(C) COMMENTS 
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--Although evidence of high consumer debt among Qatari 
nationals and expatriates is largely anecdotal, our contacts 
are uniform in signaling the issue as a problem worthy of 
continued monitoring. Call-in comments to local radio shows 
seem to indicate the public agrees. 
 
--While it appears most banks will weather the bad debt 
phenomenon, largely thanks to financial help from the 
Government of Qatar, there is disagreement among our contacts 
as to whether Qatar has reached bottom.  Much will depend on 
how well the global economy bounces back.  Until there is a 
clear global trend, bankers here are likely to remain 
cautious in their lending. 
 
End Key Points and Comments. 
 
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(C) CREDIT CRISIS 
----------------- 
1.(C) Since mid-2009, the GOQ in general and the Qatar 
Central Bank in particular have worked aggressively to inject 
fresh capital into the banking system. These cash injections 
were targeted at bank recapitalization after real estate 
losses and were designed to boost confidence in the local 
financial sector. 
 
2.(U) Even after the cash injections, however, access to 
credit and rising personal debt continue to captivate public 
debate. On February 1st, local radio talk show Al-Watan 
Al-Habib hosted the director of consumer protection from the 
Qatar Central Bank.  The hour was filled with guests calling 
in asking about the state of the banking sector.  One caller 
informed the director that the terms of his 15-year loan had 
been shortened to seven years, while another advocated the 
technical advantages of Islamic versus traditional banking. 
 
3.(C) Credit is clearly a concern for Qataris.  Local 
newspapers have been reporting on the general tightening  of 
credit in Qatar for many months. Since the Qatari real estate 
market peaked in 2008/2009, steep reductions in land prices 
have led many local banks to sharply reduce lending in the 
real estate sector.  Even outside the real estate sector, 
banks are taking increasingly stringent measures with regard 
to the provision of credit. Over the last few months, several 
novel methods have come into force to restrict credit. For 
example: 
 
--The Qatar Central Bank has issued rules encouraging banks 
to issue secured credit cards in lieu of traditional ones. A 
Foreign Service National working for Embassy Doha, was 
personally asked to post a 120% deposit of the proposed 
credit limit with The Commercial Bank to obtain a credit 
card. 
 
--Several local and international banks are starting to file 
(and make public) lawsuits against Qatari nationals. The 
Qatar Islamic Bank, Al Ahli Bank and HSBC have all announced 
in local newspapers suits against Qataris in default of their 
credit obligations, something unheard of just a few months 
ago. 
 
--Banks are beginning to require letters from the employers 
of individuals seeking credit.  These letters state that 
employers agree to notify the bank if and when their employee 
leaves the country after leaving the company. 
 
4.(C) While credit does indeed seem harder to come by for 
expatriates, credit remains more readily available for Qatari 
nationals.  The possible exception to this is the real estate 
sector.  Abdulbasit Ahmad Al-Shaibei, CEO of Qatar 
International Islamic Bank (QIIB), told EconOff Wahlstrom 
February 2 that the days of loaning money to Qataris to buy 
speculative property are over. In the past, banks would 
finance short term speculative land investments for Qataris 
looking to buy property.  No more. He considers this a 
positive development, as it is indicative of a maturing 
banking sector able to learn from past mistakes, he said. 
 
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(C)THE PERSONAL DEBT WILDCARD 
----------------------------- 
5.(C) The streets of Doha are filled with late model Toyota, 
Nissan, and Mercedes Benzes. Local malls are full of high-end 
Western brands. The natural question arises, who is paying 
for this stuff? Much of the recent consumer spending is 
indeed financed through debt, according to Al-Shaibei. 
 
6.(C) Al-Shaibei told Econoff Wahlstrom that QIIB was in the 
past willing to finance personal debt up to the point where a 
customer,s debt payments equal 70 percent of monthly income. 
 He said this is rarer today, with current ratios closer to 
55 to 60 percent -- or even lower. However, QIIB is still 
willing to finance Qatari personal debt.  This is due, in 
part, to the fact that with the downturn in real estate 
prices, the consumer goods sector is essentially the only 
growth game in town apart from publicly-financed 
infrastructure projects. 
 
7.(C) While Al-Shaibei paints a fairly bright picture of the 
banking sector, others are not so sure. Buthania Al-Ansari, a 
prominent Qatari businesswoman, claims business loans are 
much more difficult to obtain than in previous years. Mrs. 
Al-Ansari told P/E Chief Rice and Econoff Wahlstrom on 
January 28 the Central Bank has put caps on the value of 
loans banks can make to entities in any one sector.  She 
believes women entrepreneurs have been particularly hard hit 
by these changes.  Banks are now requiring significant 
up-front capital (approximately 35%) in new ventures before 
they approve business loans. Because women often lack this 
capital, they are not able to get the loans to open new 
businesses.  In her view, currently 40 to 45 percent of loan 
applicants cannot or will not be able to get funding for new 
ventures. 
 
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(C) IMPACT ON LOCAL BANKS 
------------------------- 
8.(C) Even with the recent partial recapitalization of Qatari 
banks, and a brighter economic outlook, banks continue to be 
wary. Several sources indicate significant and possibly 
unrecognized debt on banks, books, below the surface.  When 
asked about how she perceived local banks, Al-Ansari gave a 
varied picture. In her view, Qatar National Bank appears 
strong, as does QIIB, but Doha Bank and The Commercial Bank 
are in a more difficult position, the latter due to exposure 
to bad U.S.-based assets.  On February 1st, six local banks 
announced earnings, and their results generally fall in line 
with Mrs. Al-Ansari,s analysis. 
 
9.(C) Exposure to bad real estate and other debts should be a 
concern to the banks and Qatar in general and may explain the 
reluctance of banks to extend credit, according to Shaykha 
Hanadi Bint Nasser Al-Thani, a very well regarded and 
prominent businesswoman.  In a conversation on January 28, 
she expressed her view that personal debt is a major concern 
for banks. According to Shaykha Hanadi, "the banks are 
completely collateralized, but don,t loan."  In her view 
this is an unprecedented situation for Qatar.  Bad debt 
exists, but banks are not publicizing it and do not know what 
to do about it.  On the whole, the courts are not a 
satisfactory option. 
 
10.(C) Shaykha Hanadi said that if banks regularly went to 
court to obtain a judgment "half of the country would be in 
court". According to this director of the largest Mercedes 
dealership in Qatar, her company does not extend credit to 
car buyers, while the Toyota dealership does.  She believes 
the effects of this latent debt now appear, especially among 
Qataris, in the secondary market for Toyota vehicles.  Prices 
for recently-used Toyota vehicles have fallen significantly 
in the last few quarters, largely due to the need of owners 
to sell their vehicles to cover their debts. Despite the glut 
of Toyotas on the market, Shaykha Hanadi believes that Qatar 
has reached bottom in terms of personal debt and is coming 
up.  Much, she said, will depend on the strength of the 
global economic recovery. 
 
11.(C) High personal debt levels are likely to have an uneven 
impact across the banking sector .  Al-Shaibei claimed that 
personal debt levels remain very manageable for Islamic 
banks.  He said less than two percent of QIIB loans are late, 
by even one day. Other bankers have told us the default rates 
of Western banks are far higher, without offering precise 
figures. 
Lebaron