A total of 515,000 cheques worth $7.1 billion bounced in the UAE during the first five months of 2018, recording a slight drop from the same period last year, according to new central bank statistics released in early July.
During the first five months of 2017, the UAE saw 546,000 bounced cheques worth $7.8 billion.
Overall, the UAE’s cheque clearing system has processed a total of 12 million checks so far in 2018, with a total value of around $161 billion—compared to handling 12.9 million cheques worth $175 billion overall in the same period last year.
The Gulf nation has long pursued criminal penalties for any issuer of a bounced cheque, however that is starting to change. Late last year, Dubai Courts announced it would issue fines instead of jail sentences for bounced checks up to a value $54,450. The move came as part of an effort to speed up verdicts on minor misdemeanors and offenses, but was also seen as a step towards creating a more business friendly environment in Dubai. For example, today the fine in Dubai for a bounced cheque between $27,225 and $54,450 is about $2,700.
The UAE economy has historically relied heavily on cheques for processing payments, rather than electronics transfer, with the central bank only introducing a direct debit system in 2013, according to law firm CMS.
In 2016, the UAE introduced a draft of bankruptcy law that would enable businesses to lawfully declare a bankruptcy like in other markets and in turn reduce the number of bed debts for the financial institutions.