Collecting debt in any country can be a challenge, but when it comes to doing business in the Middle East, the risks for credit managers can be even greater, as was noted at FCIB’s recent International Credit and Risk Management Summit in Madrid. Opportunity is present and growing in the market, but doing business there on credit can prove very difficult, said summit speaker Andy Yiacoumi, MICM, managing partner for Credit Management Institute Middle East FZ LLC in Dubai.
There are many areas that require an alternative approach. For example, under Sharia Law, charging interests on payments is forbidden, which stems from the belief that “one should not be able to receive income from money alone,” as noted by Investopedia.
Yiacoumi noted the Gulf Co-operation Council (GCC) region—which includes United Arab Emirates, Oman, Saudi Arabia, Qatar, Bahrain, and Kuwait—carries inherent perception about “prosperity, oil, gas, investment, political stability [and] conservative society.” However, disputes, deterrents and challenges come with the territory of doing business therein. For example, no established ethics exist for prompt payments, transients comprise much of the population and, notably, professionals typically have limited credit management training. “One of the most common issues faced with companies is a lack of understanding of sound credit management processes,” Yiacoumi said. The risk of bounced checks and fraud is high in this region as well.
Given these issues and the frequent lack of accessible public information on companies, Yiacoumi said that to do business within the Middle East requires credit managers to “look at alternative options to help us better understand who we are dealing with and ethics relating to paying suppliers on time.” He cited resources such as customer references, previous trade history, bank reference, newspapers, trade associations and even a visit by the credit manager. Managing the relationship can be critical, especially in times before there are any problems. “The key to sound ledger management is a proactive collection process giving the client every positive reason to pay on time by covering every possible excuse along with regular contact,” he warned.