In a noteworthy shift, Kuwaiti banks are implementing stricter rules for approving loans for expatriates. The updated preference list focuses on sectors such as education and healthcare, giving prominence to professionals like doctors, nurses, and technicians, as well as individuals in elite positions where competence is key. Stable government jobs and positions unlikely to face competition from Kuwaitis are also preferred, aligning with nationalization policies.
Local banks are now targeting customers with high-quality credit records and substantial end-of-service benefits. Loans to newly appointed expatriates are being limited, with a cap of 25,000 dinars for non-Kuwaitis earning around 1,250 dinars, provided they have over 10 years of continuous service.
The banks’ cautious approach reflects a desire for low-risk ventures and a reluctance to accept unstable financing. Newly appointed expatriates and employees over 55 years old with low salaries and non-university educational certificates face stringent criteria for loan approval.
Interestingly, loans to expatriates in the government sector have significantly declined over the past year. This is attributed to a reduction in non-Kuwaiti appointments in government jobs in 2023 and the prioritization of appointments for citizens.
The overall growth of Kuwaiti banks’ loans has slowed down as a result of this cautious lending approach. EFG Hermes estimates a meager 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.
Experts predict the sluggish credit growth for non-Kuwaiti individual loans will persist until at least the end of the first quarter of this year. However, there are still some banks, about 4 out of 10, that are more open to financing expatriates on favorable terms. These banks, facing competition in the Kuwaiti segment, are turning to the expatriate sector to fuel their growth plans. They 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 have encouraged these banks to expand their lending portfolios while maintaining general principles for good individual lending.
These banks insist on certain criteria, such as a well-known employer and a known work history, but they are relatively more lenient when it comes to 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 stabilization period. These banks also have a broader list of eligible companies compared to their more conservative counterparts.
In conclusion, Kuwaiti banks are implementing stricter rules for expatriate loan approval, focusing on professionals in critical sectors, stable government jobs, and positions with limited competition from Kuwaitis. While this cautious lending approach has led to a slowdown in loan growth, some banks are seizing the opportunity to expand their lending portfolios by targeting expatriates. The future of the lending landscape in Kuwait remains uncertain, with varying policies among different banks.
