The pandemic has resulted in the closure of many businesses and this has resulted in loss of jobs
Nobody denies that the pandemic caused the closure of many commercial establishments around the world, in addition to layoff of workers who were working in many local and foreign companies. As a result of these, workers in those institutions were unable to fulfil their monthly banking obligations, while some merchants and entrepreneurs, especially small ones, failed to pay monthly instalments towards loans they received from banking institutions due to the closure of businesses for a long period.
This has affected the citizens of the Gulf Cooperation Council countries to varying degree too, according to the decisions of the epidemic control committees and their understanding of this matter. These matters are not taken into account that people depend on their livelihood by operating their small enterprises. Also, it was not to mention the inability of laid-off companies to pay their monthly instalments to banks on time, which has led to an increase in court cases.
This does not mean that only these people have been harmed, but also the banks have seen fall in profits since 2020. But many young entrepreneurs suffered losses due to the decisions they took regarding bad debts as a result of the bankruptcy of some institutions, while there are cases which are being discussed in the courts against individuals and institutions because of failure to pay monthly instalments for loans.
The pandemic which is still affecting the world and the closures resulted from it have led to the loss of many people’s businesses and jobs, and this has led to high cost of risk in the world, with the decline in profitability of banks during the past two years.
As the countries in the region continue to improve their financial and economic conditions and work to speed up vaccination of their citizens, along with the improvement in oil prices, this will lead to an improvement in state institutions and banks as well. Consequently, cases of bad debts and indebtedness will decline as well, which will reflect positively on the results of banks during the next stage.
Most of the banks in the region have previously stopped asking their customers to pay monthly instalments for a period of six months, but many of them are still suffering from debts, and this requires another decision from the central banks to extend this facility for some more time.
The accumulated debts by people happened due to the promotion and marketing operations carried out by the banks in the region during the pre-pandemic stage. The banks were calling people and urging them strongly to achieve their dreams by taking loans for any good, product or service, without appreciating the negative consequences in the event of non-payment of these loans. There has also been a confusion between personal loans and loans granted to commercial projects, so that some have exaggerated in obtaining them for private and recreational matters at the expense of commercial loans. This led to the accumulation of debts on some people and institutions in the region, not to mention the interest rates charged by banking institutions on these debts to increase the burdens of borrowers year after year.
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