UAE Central Bank Removes Minimum Salary Requirement for Personal Loans, Expanding Access to Millions

The latest regulatory reform makes history, for the UAE Central Bank (CBUAE) has scrapped the minimum salary requirement for personal loans, and it is among the most significant of the recent updates to consumer lending rules, to be sure, not in recent years. The aforementioned change aims at promoting financial inclusion, broadening access to formal credit, and creating more latitude within banks for devising products for a more diverse clientele.

For years, most banks in the country required a monthly salary of AED 5,000 as a minimum at the personal-loan entry level for direct employees. This requirement automatically prohibited a huge segment of low-income employees, domestic workers, part-timers, students, and gig-upholders from ever getting loans. Now, those barriers have been removed in the new rules, allowing banks to rely on their internal credit-assessment models rather than a universal salary floor.

A Major Move to Democratize Credit

Such a decision forms part of the wider agenda of the Central Bank on financial inclusion and modernization of the credit ecosystem of the country. One key reason that promotes this change is that now the workforce in the UAE has become more diverse and mixed. Just like many other residents in the UAE, a significant number earn below conventional banking thresholds but have seen quite stable, predictable income streams.

By decentralizing the criteria with respect to salary demand and putting banks in charge of developing their specific ones, the CBUAE seeks to define the direction in which the industry must move: away from heavy-handed policies and towards greater flexibility, involving assessment methods based on data rather than pool-the-number-based principles. This means banks can now evaluate applicants based on income stability, repayment behavior, employment history, and verified wage flows, not simply on whether their monthly pay meets a preset figure.

Financial analysts say this reform will extend regulated credit to millions of additional residents, especially lower-income people, who were previously dependent on informal access.

Role of the Wage Protection System (WPS)

WPS is the digital payroll conduit for 1000s of companies in the UAE, and it would be one of the major enablers of this reform. Under the new regulation, banks will generate a direct loan deduction facility from the borrower’s WPS-related salary account, ensuring automatic and regular deduction of loan repayments as soon as the salary gets credited.

Integration of WPS into the repayment structure would safely circumvent two well-understood dangers – first, it will give banks real-time visibility over the income pattern of the borrower, and it will guarantee that repayments are preferred, thereby minimizing the likelihood of losing or being late on installments. This would encourage employers and employees to be transparent in their payroll practices, the imperative on which fair financial inclusion rests.

Guardrails to Protect Borrowers

Even though the minimum salary requirement would have been abolished, the Central Bank ensured that several key protective measures applied to responsible lending across the board. 

Among those:

• Loan Amount Limit: Personal loans will not exceed 20 times the gross monthly salary or verifiable income
• Repayment Ratio Cap: The sum of monthly installments of the loan, including interest and charges, cannot exceed 50% of the borrower’s income.
• Loan Tenure Limits: The maximum repayment duration of personal loans remained unchanged at 48 months
• Income Verification Rules: A salary slip is no longer a compulsory requirement, but income will have to be verified by reliable channels, such as WPS records, employment contracts, or other approved documentation

They are the rules that will try to maintain the right balance between accessibility and prudence, ensuring that borrowers do not take on more obligations than they can financially bear.

Who Benefits Most from the New Rules?

The reforms are more likely to have highly strong positive repercussions for certain groups:

• Low-income workers: Most service-sector and blue-collar employees earn below the previously applied thresholds. Now, using the change, they can qualify for regulated loans instead of proceeding to informal lending.
• Students and young professionals: Recently started careers seldom meet official salary scales. Such individuals could now access starter loans, emergency funds, or funds related to education, as the flexibility required is available.
• Gig workers and part-time staff: The UAE labor market is transforming. Freelancers, delivery riders, and part-timers earn regular income, albeit not necessarily high. Flexibility in income verification will allow access to credit based on actual earning patterns instead of obsolete eligibility standards.
• Employees with non-traditional income structures: Those in commission-based, project-based, or variable-income occupations are now judged based on whether the income is consistent rather than by a particular fixed salary figure.

All of these cases will benefit from an otherwise exclusionary salary basis that is now eliminated, leading to a more equitable and inclusive financial environment.

Banks Expected to Innovate Lending Products

As a result of the most anticipated reform, most banks will be forced to diversify their product lineup. With the additional and diverse customer base already made eligible for loans, banks are now expected to come up with some new products, like:

• Micro-loans for low-income residents
• WPS-backed overdraft facilities
• Small-ticket emergency loans
• Alternative-credit personal loans based on digital income verification
• Savings-linked loans that help build credit history
• Deferred-payment and BNPL-style consumer credit options

The above changes may lead to more competitive interest rates, flexible tenures, and custom-designed repayment structures for first-time lower-income borrowers. It will be a shift from a heavily salary-based model to one that is likely to expect risk-based pricing models for most lenders, with better rates going to customers with stronger income consistency or good repayment history.

Economic and Social Impact

The ripple effects of this policy shift extend well beyond the banking sector.

1. Greater financial empowerment

Greater financial empowerment will now allow residents who have never had access to regulated financing to borrow responsibly for education, emergencies, family needs, or investment in small ventures.

2. Reduction in unregulated lending

Many low-income workers were accessing informal or unlicensed lenders who charged sky-high interest rates. The new regulations provide safer, more affordable options through licensed banks and financial institutions.

3. Boost to consumer spending

The increased credit access for more residents might generate demand in retail, real estate, and service sectors.

4. Stronger financial literacy

With more individuals coming into the formal credit system, banks and fintechs would likely invest heavily in financial education for their borrowers, covering aspects of repayment models, interest structure, and credit scoring.

Potential Challenges

While the reform enjoys high praise, some hurdles will need to be carefully steered around.

• Higher default risks may arise if banks aggressively underwrite new loans without proper due diligence in credit risk analysis
• Income instability among low-wage workers could potentially impact their ability to get their loans repaid
• There will also be a need for financial education to ensure that the borrowers are informed about their loan obligations
• Operational pressure for banks that now have to rely on increasingly complex underwriting models instead of simple salary thresholds
• Monitoring and enforcement of the guidelines put forth by the Central Bank to ascertain responsible adherence by banks to their new standards

Nonetheless, the experts noted that most of these challenges are considerably diminished with the UAE’s good regulatory framework teamed with WPS-based repayment capabilities.

Expert Opinions

Industry experts, on the whole, have welcomed the CBUAE’s decision by observing how the UAE has been incrementally modernizing its financial regulations along with changing global fintech trends. Economists are of the opinion that the policy will enhance the economic resilience of the country in the long run by further integrating residents into the formal financial system.

Bank executives in today’s economy pointed out that the change allows them to serve previously untapped customer segments and encourages more dynamic loan structuring. Innovators in the fintech space see this reform as a launching pad for them to create new credit products, driven by technology and powered by alternative data and digital systems for payroll.

Alignment with Arnifi

For Arnifi, which we see as a pioneer in digital finance platforms, this regulatory shift brings great promise. For example, the removal of minimum salary requirements means Arnifi can spread its wings to a much larger audience, especially those who are now excluded and who now qualify for access to formal credit for the first time. 

By utilizing digital income verification, along with repayment automation linked to WPS and advanced credit-scoring models, Arnifi will be able to design inclusive, responsible, and accessible lending products for these newly eligible customers. Accordingly, this reform fits perfectly into Arnifi’s vision of democratizing financial access and creating an inclusive economic future for the UAE.