(Sukuk.net - Khaleej Times) Finally, there is light at the end of the tunnel. The federal government has moved to create a lending giant — Emirates Development Bank (EDB) — which, it appears, will not only thaw the frozen local credit market but in the long-run fund economic growth across the UAE.

EDB came into being last night when the ministerial council for services approved the merger of Emirates Industrial Bank and Real Estate Bank, which only a day earlier had been injected with the balance sheets of two of the world's largest Islamic home loan providers — Tamweel and Amlak Finance.

From last month's Dh120 billion emergency funding facilities for banks, a proactive measure to support the banking system, the government has now moved to clean up part of the mess created by the global financial crisis.

The UAE real estate market ground to a halt this autumn as funds from the global financial system drained into the hole punched open by the collapse of the U.S. sub-prime mortgage market.

Most mortgage providers in UAE, including Amlak and Tamweel, had either stopped or restricted their lending activities after the death of the securitisation market—their primary source of raising funds.

The situation is no better for trade and project finance the world over, but of course a defunct mortgage market hurts more as it is tapped by a much broader segment of borrowers and the wealth impact could be only comparable to a crash in the stock market.

In the case of UAE in general and Dubai in particular, real estate and the construction boom seemed to have led the high-paced economic growth in the last several years. A major reversal in the construction boom could thus have a devastating impact on the overall financial sector which has funded it.

Hopes are that the new the Emirates Development Bank would break this logjam with new funds, directly from the coffers of the federal government, at competitive interest rates and at terms borrowers can afford.

There is also talk of some promotional offers to instill life in the mortgage market.

But because the government chose not to share the plan with the public and act first, a lot of questions remain.

What is the final mandate of the new bank? Who would get new loans? Will the bank serve borrowers across the board, or concentrate within certain segments?

Most importantly; where will the new money come from? At least shareholders of listed firms Tamweel and Amlak had to know what's happening.
.bookmarks { CLEAR: both; BORDER-RIGHT: #e4e4e6 1px solid; PADDING-RIGHT: 5px; BORDER-TOP: #e4e4e6 1px solid; PADDING-LEFT: 5px; FLOAT: left; MARGIN-BOTTOM: 10px; PADDING-BOTTOM: 0px; BORDER-LEFT: #e4e4e6 1px solid; PADDING-TOP: 0px; BORDER-BOTTOM: #e4e4e6 1px solid } A.BoxLinks { COLOR: #015fb6; TEXT-DECORATION: none } END.BoxButtons { vertical-align: middle; BORDER-TOP-STYLE: none; BORDER-RIGHT-STYLE: none; BORDER-LEFT-STYLE: none; BORDER-BOTTOM-STYLE: none } #yahooBuzzBadge-form { FLOAT: left } #yahooBuzzBadge-form SPAN { WIDTH: 0px } Digg This Article Digg   Add to Delicious Del.icio.us   Seed this article Newsvine   ARTICLEURL   Add to Reddit Reddit   Add to furl Furl ` omar1.1 mfn