UAE Banking Federation’s Jamal Saleh on the potential of digital lending

In this interview with Gulf Business, UAE Banks Federation‘s (UBF) director general Jamal Saleh highlights the significant strides made by the UAE banking sector in embracing digital solutions and the potential of digital lending to bridge the financial gap for underbanked populations.

Saleh shares that the UAE’s regulatory framework, coupled with technological advancements, has created a favourable environment for the growth of digital lending. He emphasises the importance of collaboration between traditional banks and fintech companies in driving innovation and ensuring the safe and responsible use of digital lending platforms.

How is the UAE banking sector evolving to support the growth of digital lending solutions?

The UAE banking sector is undergoing a significant transformation to embrace digital lending solutions in response to the evolving demands of the end-users. With increased adoption of fintech and digital banking solutions and a favourable ecosystem for buy-now-pay-later (BNPL) and deferred payment options in e-commerce, much more personalisation is happening in the segment.

That said, customers increasingly demand more convenient, accessible, and personalised digital financial solutions. With further advancements in automating processes and improving risk assessment practices through artificial intelligence (AI), machine learning, and big data analytics, banks and financial service providers will be able to provide faster loan approvals, improved interest rates, and seamless application workflows.

A key driving force behind the robust growth in diversified lending services and the financial inclusion that has been achieved as a result of these has been the Central Bank of the UAE’s (CBUAE) FinTech & Digital Transformation Strategy, which aims to implement effective and balanced regulations and robust digital infrastructure that foster innovation in the financial sector, including initiatives that promote fintech and digital payments.

This regulatory support has created a favourable environment for the growth of digital lending solutions.

What steps are being taken to build an inclusive ecosystem for digital lending in the UAE?

Building an inclusive ecosystem for digital lending in the UAE is being achieved by collaboration among various stakeholders, including banks, fintech companies, regulators, and technology providers. Our UBF member banks, under the direct supervision of CBUAE, are developing user-friendly digital platforms and collaborating with fintech companies to leverage their expertise in technology and innovation.

Some of the steps being taken to create a robust and inclusive ecosystem include the recently introduced regulatory sandboxes that allow fintech companies to test new products and services in a controlled environment. At the same time, open banking initiatives are being explored and banks and fintech companies are working together to develop data-sharing agreements to enable improved risk assessment and enable more personalised lending decisions.

In what ways do you see digital lending helping to bridge the financial gap for underbanked or underserved population in the UAE?

Digital lending solutions offer a promising avenue to bridge the financial gap for the underbanked/underserved population. Unlike traditional lending, digital lending platforms make it simpler and easier to access credit. For individuals with limited credit history, digital lending can provide an opportunity to build a credit history.

Meanwhile, digital financing provides financing access to SMEs that not only address immediate finance challenges but also pave the way for a more inclusive and sustainable future for small and medium-sized businesses.

With online shopping sales expected to reach $9.2bn in 2026, UAE’s flourishing e-commerce market presents a significant opportunity for embedded finance solutions like BNPL options and integrated payment gateways.

How can digital lending solutions contribute to financial inclusion and economic growth in the region?

By providing access to credit, digital lending provides individuals with flexible financing options that may support them to start a business, invest in education, or purchase essential goods and services, thus empowering them to improve their overall wellbeing.

Meanwhile, the growth of digital lending can foster healthy competition in the financial sector, leading to lower interest rates, improved customer service, and innovative products, thus promoting economic growth. Moving forward, digital lending will prove to be strategic to the UAE’s SME ecosystem, the backbone of the national economy, which makes up 94 per cent of the number of businesses in the UAE.

What is the current regulatory stance on digital lending and BNPL platforms in the UAE?

UAE’s regulatory landscape for digital lending and BNPL platforms is evolving to strike a balance between innovation and consumer protection. The central bank’s digital strategy and guidelines focus on prioritising licensing, consumer protection, and risk management. The main regulatory framework for financial services and fintechs is the Financial Services and Markets Regulations 2015.

How do you see the regulatory framework evolving to balance innovation with consumer protection in the digital lending space?

While specific regulations may have changed since my last update, the general framework continues to prioritise consumer welfare and market stability. Key regulatory bodies involved in overseeing digital lending and BNPL platforms in the UAE include CBUAE, which is the regulatory authority for the financial sector, including digital lending and BNPL activities. CBUAE sets the rules for licensing, consumer protection, and risk management. In addition, the Financial Services Regulatory Authority (FSRA) within Dubai International Financial Centre (DIFC) oversees financial services activities within DIFC, including digital lending and BNPL.

What are the key challenges the UAE faces in regulating digital lending, and how can they be addressed?

One of the challenges faced as the financial sector evolves is to keep up with the fast-paced nature of technological innovation, which can make it difficult for all to keep up and ensure regulations remain relevant. Also, digital lending platforms often operate across borders, calling for collaboration among international regulatory bodies.

In this case, we also need to ensure data protection of consumer information. The UAE’s banking and fintech sector has become a model for addressing these challenges due to the strategic foresight of the CBUAE and the country’s leadership and vision.

The recently introduced regulatory sandboxes are a crucial measure in this regard. In addition, there are initiatives to harmonise regulatory standards across the region push for more innovative solutions for consumer protection and use artificial intelligence (AI) and automation to monitor and supervise digital lending to manage risk and ensure compliance.

What are the key dos and don’ts for customers when using digital lending solutions? How is UAE Banks Federation working to educate consumers on the safe and responsible use of digital lending platforms?

We at UBF, and our members, promote the financial and digital wellbeing of customers and are invested in educating them on safe borrowing habits and staying secure while using digital platforms. Working closely with regulatory authorities, we ensure that customers are adequately protected and that digital lending practices are fair and transparent.

Some of the key dos and don’ts to be noted by customers are as follows:

Dos:
1. Research different digital lending platforms to compare interest rates, fees, and terms.
2. Carefully read and understand the terms and conditions of the agreement, including interest rates, repayment schedules, and any potential penalties.
3. Verify the legitimacy of the lending platform by checking its registration with the relevant regulatory authorities.
4. Ensure that the platform uses secure encryption technology to protect your personal and financial information.

Don’ts:
1. Avoid borrowing amounts that you cannot comfortably repay within the agreed-upon timeframe.
2. Never share personal information, especially over the phone, with anyone who claims to be from the lending platform, as there may be a risk of scams.
3. Never ignore fees or charges that may be associated with lending.

What measures are being taken to ensure transparency and fairness in digital lending practices?

The central bank’s guidelines require digital lending platforms to provide clear and upfront disclosure of all terms and conditions, including interest rates, fees, and repayment schedules. They also require lending platforms to comply with data privacy and security regulations to protect consumers’ personal information.

How do you envision the future of digital lending in the UAE over the next five years?

The UAE’s digital lending landscape is poised for significant growth and further innovation in the upcoming years. Driven by technological advancements, regulatory support, and increasing consumer demand, digital lending solutions are expected to become more prevalent and accessible.

Looking forward, AI and machine learning will play a crucial role in improving credit risk assessment, fraud detection, and customer service. Blockchain technology can enable secure and transparent transactions, as well as facilitate the creation of new financial products. Meanwhile, the regulatory framework for digital lending will likely evolve to keep pace with technological advancements to ensure consumer protection.

What role do you see for emerging technologies, such as AI and blockchain, in shaping the future of digital lending?

Emerging technologies like AI and blockchain will be instrumental in shaping the future of digital lending. They can contribute to improved credit risk assessment through automated extensive data analysis and will assess creditworthiness accurately, allowing lenders to serve a broader range of customers.

At the same time, it may pave the way for more personalisation to offer tailored finance options for both individuals and SMEs, allowing flexibility and diversity in digital financing. AI could also be valuable in fraud detection. It can detect fraudulent activities more efficiently, thus protecting both lenders and borrowers.

As for blockchain technology, I believe that it can provide a secure and transparent ledger for loan transactions, reducing the risk of fraud and ensuring that all parties have access to accurate information.

Digital lending platforms use intelligent contracts to automate lending processes, reducing the need for intermediaries and speeding up transaction time. UBF member banks and our financial ecosystem are well positioned to leverage these emerging technologies, driving economic growth and improving financial inclusion, thanks to CBUAE’s future-ready vision and regulatory frameworks.

How is the UBF fostering collaboration between traditional banks and fintech companies to drive innovation in digital lending?

The federation plays a pivotal role as the knowledge-sharing platform that fosters collaboration among member banks and financial institutions, enabling them to use their respective strengths to explore new opportunities in digital finance and solutions like digital lending.

The UBF also works closely with the central bank and other regulatory and government stakeholders to create a conducive ecosystem for innovation in the digital lending space. Our specialised committees for digital banking, compliance, and fintech, all of which comprise top-notch field experts, form a consultative body to provide resources and awareness for all to succeed in the digital lending landscape.

Are there any upcoming initiatives or partnerships that you can share with us that aim to further enhance the digital lending landscape in the UAE?

In addition to the many that UBF already has, a lot is tabled for the coming months, and several new partnerships are being established, all of which will be announced in due course.

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