Sample Thesis Paper
Ever since the recession has hit the UAE some of the major changes that can be observed as policy changes are that interest rates have climbed substantially and banks and other financial institutions are very hesitant in providing loans to the general public. This is not the case with only loans mortgages are also considered as high risk by the banks and they are very reluctant to provide it to the customers. This attitude from the financial institutions has an overall effect on the market. Making fewer funds available to the customers and companies is increasing the risk of recession in UAE.
This trend followed by the banks could be analyzed quiet well by understanding the concept of the banks that when a bank views a loan as high risk or the environment is like such that the banks considers providing loans as danger what they do to avoid giving loans is they increase the interest rates. When the interest rate becomes high on loans then the public has to think twice before applying for a loan. Similarly when the banks see loans as low risk they decrease the interest rate so as to enhance the borrowing trend in the public. The current situation which the UAE is facing is that the government has dropped the interest rates in an attempt to boost growth. According to Andrew Clare who is a professor at Cass Business School said that “This may be the first sign that people are thinking you can’t get back to the debt-fuelled halcyon days of 2007” (Elliott 2009).
Another technique which is used by the banks is to increase the spread between what the customers would get if they deposit the money and what they will have to pay if they want to borrow money from the bank. What the UAE government needs to do now is to lower down the interest rates reason being to encourage the public in spending the money rather than to save. As we have discussed before that during recession there is a general tendency of saving rather than spending. How the government change this trend is by decreasing the interest rates and persuading the public to spend so that the money could enter the system and the economy of the nation can be back on its track.