Amlak, Tamweel need Dh18.7bn

Tamweel may be under pressure to find fresh funds to the tune of about Dh5.7 billion before June 30 to honour its financial commitments. This is revealed by the contractual asset-liability mismatch in the UAE's largest Islamic mortgage financer's first quarter financials.

In the case of Amlak Finance, the second largest player in the Islamic home finance market, the fund requirement before December 31, will be in the region of Dh13bn. While Tamweel shows cash and bank balances of Dh332 million as of March 31, Amlak's bank balance is at approximately Dh600m, as of December 31, 2008.

These two mortgage financiers, which are together thought to control nearly 60 per cent of the mortgage business in the country, may not be able get back to business until fresh funds are injected into their kitty. No fresh loans are being processed currently, according to market sources.

"These fresh funds are required in addition to the company's current resources," explained a financial analyst.

"Tamweel and Amlak were used to funding from institutions, mainly banks, until the financial crisis happened. With liquidity literally drained out of the banking system, these two companies were left in the lurch without any funding sources," he explained.

The securitisation route also had dried up leaving the lenders with no other option than to seek help from shareholders or the government. On October 5, 2008, the news first broke that Tamweel and Amlak Finance were at an early stage of discussions that could lead to the establishment of a merged entity, subject to shareholders and regulatory approvals.

In November 2008, the Ministry of Finance formed a steering committee to review, assess, liaise and provide advice to these companies and make recommendations to the Minister of State for Financial Affairs on future course of action.

The committee is said to have appointed various advisors, including accounting and legal firms and an investment bank, to assist in making recommendations, which are expected to address liquidity issues and organisational structure.Prior to the crisis, these two companies had each applied for a banking licence with the Central Bank to gain access to funds from individuals.

Keep up with the latest business news from the region with the daily Emirates Business 24|7 newsletter. To subscribe to the newsletter, please click here.

Follow Emirates 24|7 on Google News.