United Arab Emirates - Country Commercial Guide
Trade Financing
Last published date:

Methods of Payment

The UAE may be a challenging place for U.S. companies to do business, especially if they are unfamiliar with banking practices in the region. Payment recovery tends to be slower than in the United States and Europe. Payment delays of many months and sometimes years are not uncommon.

Trade financing is very common in the UAE, and most local and international banks offer services to small and medium-sized enterprises, allowing them to trade with local and international markets. Commercial Letters of Credit (LCs) are extensively used as a means of payment in overseas trade. The most commonly used types of LCs include: Sight, Deferred Payment, and Revolving. Provisions of the Commercial Transactions Law (CTL) are complementary to the parties’ intentions and who often elect to be governed instead by International Chamber of Commerce (ICC) Uniform Custom and Practice for Documentary Credit. According to the CTL, in absence of any clear indication, the LC is considered be irrevocable in contrast to international standards.

Checks are an important payment instrument in the UAE for transactions of large amounts. Checks are processed and cleared digitally on the same day using Image Check Clearing System (ICCS) . Bounced checks are considered a criminal offense in most cases and can be punished by prison sentences.

Electronic fund transfers are widely used in the UAE. The Central Bank of the UAE (CBUAE) operates the UAE Funds Transfer System (UAEFT) the only real-time gross settlement (RTGS) system serving retail and large value payments. CBUAE imposes the use of the International Bank Account Numbers (IBAN) system. .

The Central Bank launched the UAE SWITCH scheme in 1996, which now connects the ATMs of all but 3 small foreign banks. The scheme allows cardholders to withdraw cash from any of the 4,500 ATMs in the UAE, and through its connection to GCCNET, allows cardholders to obtain service at ATMs throughout the Gulf region.

VISA and MasterCard credit cards are widely accepted by businesses and government services. American Express, Diners, and Discover are less widely accepted. Small establishments often only accept cash. All backend systems, point of sale (POS) terminals, and cards currently used are compliant with EMV standards (the MasterCard-Visa-Europay global standard for chip-secured credit cards).

Various digital payments initiatives have emerged in the last few years (the government’s Mobile Wallet, Etisalat Wallet, Beam Wallet, NOL cards, Apple Pay, Google Pay and Samsung Pay), but they are not very widely used yet. In recent years CBUAE issued multiple regulations to to facilitate the adoption of digital payments and regulating its infrastructure. Virtual assets are not legal tender in the UAE. A few virtual assets service providers have been provisionally licensed to operate in UAE.

The three major global credit rating agencies (S&P, Fitch, and Moody’s) have a regional presence in the UAE and rate most sovereigns (local and federal governments) with the notable exception of the government of Dubai and some of its GREs. The Chambers of Commerce of Dubai and Abu Dhabi also offer customized credit reporting to their members. The government owned Al Etihad Credit Bureau started operations in 2016 and began providing financial institutions with credit scores. Many international trade credit insurers and trade credit risk management providers are also present in the UAE.

Foreign Exchange Controls

The Emirati currency, the Dirham (AED, sometimes abbreviated Dhs), has been pegged to the U.S. dollar since 1980. The mid-point between the official buying and selling rate for the dirham has been fixed at AED 3.6725 per 1 USD since 1997. The government believe this promotes stability and confidence in the currency. Interest rates in the UAE tend to parallel those in the United States. There are no currency restrictions in the UAE and residents and non-residents are entitled to hold fully convertible offshore or onshore bank accounts in the UAE or overseas in dirhams or in foreign currency.

U.S. Banks and Local Correspondent Banks

Citibank is the only U.S. bank established onshore in the UAE that offers full banking services. To service international clientele, J.P. Morgan Chase, Bank of America, Citigroup, Bank of New York Mellon, and Perella Weinberg Partners Group have licensed onshore representative offices.

Institutions with an offshore presence offering financial services include: Citibank, J.P. Morgan Chase, Bank of America, Morgan Stanley, Merrill Lynch, Goldman Sachs, Northern Trust, and Perella Weinberg.

A number of UAE banks either have branches in the United States or correspond with certain American banks to cater to the needs of their local and international clientele.

U.S. government trade financing resources may be available to U.S. companies seeking to do business in UAE. Assistance from the U.S. Export-Import Bank (EXIM) is available for direct loans and loan guarantees to U.S. firms exporting to the UAE. The Small Business Administration’s (SBA) Office of International Trade may provide loans on a smaller scale, with a focus on new-to-export firms.

For more information about the methods of payment or other trade finance options, please read the Trade Finance Guide.

To access UAE’s ICS section on financing, visit the U.S. Department of State Investment Climate Statement website.