Financial Services

Financial services sector

Financial services are considered the back bone of modern economy. According to the international monetary fund definition of financial services, a process in which a consumer acquires financial goods is considered financial service. . There are multiple businesses operating under the domain of financial services, these companies providing services to the general public and other businesses.  These included banks, credit card companies, insurance companies, accountancy firms, brokerage houses, asset and investment management companies and mutual funds.

Financial services industry in UAE

The economic growth of every country is dependent on the financial services because it ensures the flow of capital. The financial services play a vital role in the liquidity. A good and strong financial sector can lead to economic growth and vice versa like other advance economies in; there are many finance companies in UAE. In order to broaden the scope of finance services companies in Dubai, The Dubai International Financial Center (DIFC) was established. The Dubai International Financial Center is facilitating multiple businesses within financial services in Dubai. These are consisting of banking companies ranging from services, investment, corporate and private banks. There are capital markets companies consist of equity market, debt instruments, derivatives market and commodity exchanges. The Dubai international financial center is also focusing on Islamic finance industry, insurance and reinsurance.  DIFC has performing very well and it has given really amazing results hence its started operations.  The Dubai financial Regulatory Authority serves as a regulator of The Dubai international Finance Center, DFRA works independently.

There are many financial services companies in Dubai that are providing support and services to different stakeholders like corporate companies, individual consumers and local and federal government.

Central Bank of UAE

The regulations of banks and financial institutions are critical to every economy. Therefore every country has established their central bank for similar purpose United Arab Emirates established The UAE Central Bank back in 1980. The central bank Of UAE is primarily responsible for the regulation of financial services in UAE, money supply and money management. The number of banks in UAE is more than 50 with the operation of 300 branches, these all are regulated and fine-tuned by The Central Bank of United Arab Emirates.


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    Other Banks in UAE

    The role of commercial banks became really important, because the commercial banks are providing many services along with the traditional business of lending and deposits. There are more than 50 Banks in UAE. If we talk about the Islamic financial system there are 8 Islamic finance companies in UAE, they are providing banking and financial services. According to the Moody’s remarks about finance companies in United Arab, the financial services sector of UAE is the most stable sector in the world it is because of its fiscal resilience after the pandemic affect. Along with Islamic and commercial banks there are some other banks as well like industrial and merchant banks. The first Islamic finance company in Dubai was found in 1975 in the shape of Dubai Islamic Bank. It has 66 established branches. Commercial bank of Dubai is considered a successful and modern finance company in Dubai that was established in 1969.

    Brokerage House

    Dubai Financial market is a finance company in Dubai, that was established in 2000 and its started operations in the same year. DFM is considered a good company for secondary trading of securities. Dubai Financial market is trading in government bonds, public companies securities and mutual funds and other approved financial instruments. The DFM is regulated by United Arab Emirates security and commodity Authority. Dubai Financial Market and NASDAQ consolidated their operations in 2010 in order to strengthen the operations within financial and capital market.

    Insurance Sector

    No one can deny the importance of insurance. Insurance is referred to the concept of transferring the risk associated with an asset by paying a certain amount. Hence Dubai is become the central spot for global trade. Global trade is all about import and export, shipment of goods from one place to another demonstrate high level of risk. Every person wants to minimize the level of associated risk with the assets they want to move. Further insurance is obligatory in many countries. There are many types of insurance. Due to the massive increase in the demand of the insurance services there are many financial services companies in Dubai they are providing the insurance to individual consumers and corporate companies in many types. 

    Investment and Asset Management Company

    Investment companies play a good role in inculcating the saving and investment habits in people. One of the core products of investment and asset management companies is mutual funds. An investment scheme, in which experts invest the collected savings of people in various types of securities available in the money and share markets, in order to get return is called mutual fund. Mutual fund investment scheme is very beneficial for those individuals who have surplus money. Mutual fund companies invest theirs savings in portfolios in order to minimize the associated risk that would not be possible without having huge funds and expertise. Mutual fund association of Pakistan facilitates the mutual fund companies in selecting and managing the portfolios that is very crucial for asset management companies. These investments cannot be made without investment and asset management companies. An individual investor cannot acquire the expertise of highly experienced people. If they want to invest they need to acquire the services of a financial services company operating in assets and investment management.

    Finance companies

    In particular a finance company is considered different from banks now days. Banks accept deposit then lend them to clients and provide some sort of other services as well while finance companies only give loans to clients and do not provide any other services. The scope of finance companies has vastly increased because the banks are becoming stricken day by day, and focused on the credit history of the clients very strictly. Finance companies do not focus as much on client’s credibility as banks.  Therefore the clients who do not have good credit history often go to finance companies and they give them loans by pledging an asset or through mortgage. There are some companies who primarily selling their products but in order to provide finances to clients they created subsidiaries that work as a finance companies. The best way to explain this scenario is General Motor and General Motors Acceptance Corporation.  

    There is some debate about classifying the finance companies into sub categories. The economists separated the finance companies into three types.

    Consumer Finance Company

    The first category they have defined as known as consumer finance company. These companies give loans to the individuals, the amounts of loans are small and the condition on which the loan is given is not supportive to the individual who take the loan. These companies are also known as direct-loan or payday companies. They are accused of being exploiting the needy individuals.

    Sales Finance Company

    The other type is known as sales finance company. These companies are also called acceptance companies. These companies’ gives loans to companies on short term bases just like direct-loans companies give to individuals. The difference is that the companies which take the loan are credible and big organization that why they are not required to secured the loan with collateral or mortgage. Furthermore the 2nd difference is the interest rate. The interest rate charged from companies is lower than individual normally similar to the banks or a little bit lower from the banks. This type of loan cannot be utilized for the purpose of long term investment as the return period for the loan is short term.

     Consumer Finance company

    The third type is defined as the commercial finance companies. These companies are also known as commercial credit companies. Commercial finance companies make advances to all companies irrespective of their sizes where these are small or big. They often provide the finances for the installation and purchasing of new equipment and plant. The small companies are often given the loans at higher interest rate than big corporation that is because of the insolvency risk associated with the small companies. Small companies may have more chances of defaulting.

    In recent years the trend of taking of loans from banks is shifted towards finance companies. The reason behind this development is the concern of banks for client’s credibility history, while finance companies do not give much attention to these things. Therefore as a result the finance company more likely to accept the request for loan quicker than bank. Small businesses generally take loans from finance companies in order to fulfill the requirements of the business because they do not possess a good credible history and there credit ratings are also not good.

    Looking to the above points a finance company in Dubai has the requirement of the modern economy. That why we have decided to provide our services to the stakeholders in UAE. We are the pioneer in the industry and our sole purpose is to give share in strengthening the economy of our country.