THE BOUNCING CHECKS IN DUBAI

The reports from Dubai indicate that the country has not fully recovered from recession as there are cases of bouncing checks and criminal actions. The property developers ruled the roost in Dubai just a couple of years back. Many people heavily invested in properties borrowing from the banks with a view to sell them quickly on higher prices. Banks were also willing to lend on properties as the investment appeared solid then.

The banks should remain fully oiled with money for the smooth sail of this kind of business. If one terminal turned weak the buck would stop there. By the end of 2008 the liquidity in banks got dried up mainly due to the general slump in global economy. The Emirate Central Bank also took some measures to curb Banks           from misadventures like interest rate cut on liquidity support. When the Banks stopped lending the real estate prices came down which in turn affected remittances in to the Bank as investors were reluctant to sell the property at lower prices. It is a notorious vicious circle during recession.

Well. Those were in 2008-2009. Now as the global recession receded Dubai also is limping back to normalcy.

However it seems that things are not quite normal there yet because one in seven criminal cases registered in the country pertains to dud checks. In 2009 about 15 to 16 thousand cases were registered on that category. Since the law enforcement in the country is strict many thousands are in jail on charges of returned checks.

In the state of Dubai as in other parts of the emirates a bouncing check would invite severe criminal punishment capable of sending a man to jail for years on end. It is a law enacted when business were done in mutual trust and when feverish Bank transactions or business ventures were unheard of as is now taking place.

Now, not only criminals but many law abiding persons are also put in various jails there. One reason for increase of such cases in Dubai is that it relies and insists on checks for all financial transactions. The Banks insist on post dated checks for personal loans and one default, knowingly or unknowingly would result in jail sentence for a long period.

An emotional letter of one Simon Ford, owner of a travel agency company in Dubai, who had to flee back home due to insufficient funds reads :

“I am not running away from debt, I am purely protecting those dearest to me and getting out of a country which, due to the lack of structured bankruptcy laws and a banking system which has zero flexibility on loan repayments, drives people to make horrible decisions,”

It is high time countries like Dubai which enjoy financial boom and higher volume of transaction adopt a reasonable stand on loan repayments as in other countries.