According to the Central Bank of Kuwait’s CEO, Waleed Al-Awadhi, between 2000-2017, there has been a growth in the loan portfolio by 14%, from KD 1 billion to KD 12 billion.
Different periods witnessed varied growth rates. 90% of the 429,000 Kuwaiti borrowers are below 50 years. Kuwait has a total of 739,450 borrowers with an average salary of KD 1,100, the average consumer loan being KD 3,600 and the average housing loan being KD 23,000.
In order to meet the clients’ financial requirements and sustain financial stability, the CBK revealed new lending rules. It revised the rules and regulations for providing personal loans and financing facilities for personal as well as the housing sector.
Yousef Al-Obaid, CBK’s Deputy Governor stated that this would be done as per Kuwait economy’s basic indicator movement, the performance of the banks and other factors linked with loans.
For consumer purposes, the maximum amount of loans and Islamic financing has been raised to 25 times the borrower’s net monthly salary or KD 25,000 at maximum. In the case of housing purposes, the maximum limit for loans and Islamic financing was unchanged at KD 70,000, thus the net amount becomes KD 95,000 which a customer can attain.
Any kind of unjustified price spike of the commodities and services has to be averted by the Ministry of Commerce and industry as per CBK’s new lending rules. The client who has applied for a loan must be subject to a thorough financial and credit check, along with his purpose of taking the loan. The new regulations mandate the financial institutions granting the loans, to perform these checks.
The existing borrowers can avail a new loan only if 30% of their installments have been paid on time. The present contract will be dropped once the new loan is approved which will be based on a new contract. This will be done while respecting the monthly installment’s maximum percentage, which is the employee’s net 40% of the net salary and retirees 30%.
In case of consumer loan, the retired clients can ask for an extension of the installments for a year from the original 5 years and for a housing loan, 5 years extension can be asked from the original 15 years. This will result in a decrease in the monthly installments but 30% below the retiree’s salary. The indemnities or the cash in the client’s account can’t be used by the financial institutions for any purpose unless the client has given a written approval and interest mustn’t be charged for the remaining period in case of the early repayment of the loan.