A fall in the value of letters of credit (L/Cs) opened by the UAE's banks is being seen as a sign that credit remains tight in the federation.

According to a Dubai business leader, small- and medium-sized enterprises (SMEs) are finding it particularly difficult to obtain credit from risk-averse banks.

Liquidity

Despite high liquidity levels amongst the UAE's banks, Director General of Dubai Chamber of Commerce and Industry, Hamad Mubarak Buamim, says banks are not making credit available to smaller firms.

"There is a major improvement in liquidity compared to two years back and we see the banking sector flushed with cash; but financing from banks to companies is not improving," he said.

"The cost of financing is also high. It's a challenge to the SMEs for their growth," he added.

Deposit hike

The UAE Central Bank meanwhile has reported that the value of new L/Cs opened in the federation fell by nearly three per cent in July compared with June.

The value of L/Cs dropped from 3.2 billion UAE dirham (AED3.2bn) to AED107.6bn over that period.

Deposits with the banks meanwhile soared to nearly AED1 trillion in July, the highest since November 2009.

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