Atradius Survey: Significant adoption of credit insurance in the United Arab Emirates

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By Atradius

Tuesday, June 28, 2022 09:30 MYT

Anxious to preserve their cash, companies have turned more to credit insurance than last year

DUBAI, United Arab Emirates – Media outreach – June 28, 2022 – The latest Atradius Payment Practices Barometer Survey for the United Arab Emirates revealed a year-over-year increase in the number of companies adopting credit insurance. The majority of companies surveyed cited the need to protect cash flow and minimize days of unpaid sales (DSO) as primary reasons for purchasing a policy. In fact, 60% of companies surveyed say that liquidity problems are the main cause of payment defaults. However, the number of companies choosing to use specific trade finance solutions to complement their trade finance policy has also increased.

Despite this increase in the adoption of credit insurance, there was no year-over-year change in the total value of B2B sales made on credit, which remained at around half of all sales. Write-offs also remained stable at 8%, unchanged year-over-year. Businesses in the UAE reported different reasons for offering customer credit. These ranged from the desire to increase sales with existing customers in the agribusiness industry to the need to remain competitive in regional and international markets, as indicated by respondents from the ICT industry.

“The UAE occupies a strategically important position as the commercial hub of the region,” said Schuyler D’Souza, Managing Director Middle East at Atradius. He explained: “Although there remains a widespread preference for cash, trade credit is used to stimulate sales in various sectors where businesses compete in international markets. The more widespread use of credit insurance in the region probably reflects the development of more sophisticated credit management strategies. This is an indication of a maturing market and another example of the importance of the country’s trade orientation.

Overall, businesses in the UAE seemed optimistic about their business prospects. The Atradius survey revealed an optimistic mood among respondents, the majority of whom anticipate an improvement in customer payment practices over the coming year. 71% (all industries) said they expect to increase the amount of B2B credit they transact in the coming months, reflecting their anticipated market share growth. DSO was also expected to be subdued. 53% of total invoice value is currently overdue, an improvement from 60% reported in our last survey in 2021.

The exception to the positive outlook is the steel and metals industry, which has been affected by geopolitical tensions and supply chain issues. In this year’s survey, the industry reported an increase in write-offs year over year; 12% of all B2B invoices this year, up from 9% last year. The sector has also seen an increase in late payments; 49% compared to 30% last year.

Atradius conducted the Payment Practices Barometer survey during the first half of 2022. Responses were collected from companies in the United Arab Emirates in the sectors of food and beverage, chemicals, consumer durables, electronics/ICT and steel/metals.

Download the full report here: https://atradius.sg/reports/payment-practices-barometer-united-arab-emirates-credit-management-strengthtening.html

About Atradius

Atradius is a global provider of credit insurance, surety and collection services, with a strategic presence in more than 50 countries. The credit insurance, surety and collection products offered by Atradius protect businesses around the world against the risks of default associated with the sale of goods and services on credit. Atradius is a member of Grupo Catalana Occidente (GCO.MC), one of the largest insurers in Spain and one of the largest credit insurers in the world. You can find more information online at https://atradius.com.hk/

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