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The United Arab Emirates (UAE) and Saudi Arabia have unveiled new frameworks for short-term credit agreements.

The Central Bank of the UAE (CBUAE) has  its newly amended Finance Companies Regulation.

Under the new framework, the central bank says that the provision of short-term credit can be carried out by entities operating as agents of licensed banks or finance companies, following approval by the CBUAE.��

Entities will also be able to carry out this activity upon being licensed by the CBUAE as Restricted License Finance Companies.

Going forward, currently unlicensed entities that carry on any form of short-term credit activity and intend to continue to carry on these activities will need to either apply to the CBUAE to be licensed as a Restricted Licence Finance Company; or partner with a licensed finance company or bank.

The CBUAE’s announcement came just after that of Saudi Arabia, where the Saudi Central Bank (also known as SAMA) has  its own buy now, pay later (BNPL) framework.��

Saudi Arabia began consulting on a framework in May of last year, and released new rules on December 17.��

The rules will now come into effect 30 days after being published on the regulator’s website (January 16).��

New rules include provisions relating to licence requirements and regulatory measures, such as internal controls.��

Among rules that BNPL firms in the country will have to follow include a limit of 5,000 Saudi riyals ($1,332 USD) and the number of instalments granted to the consumer must not exceed a maximum of 12 instalments.

BNPL firms will also need to create a customer due diligence (CDD) policy and, at a minimum, ensure the verification of consumers' phone numbers and addresses, in compliance with the country’s Electronic Transactions Law.��

Firms in Saudi will also have to comply with tough local employment laws.��

For example, at least 50 percent of human resources employees must be Saudi nationals when the BNPL company starts operations — a percentage that will apply to all departments and organisational levels.

This percentage must be increased annually by 5, at least until it reaches 75 percent, the new law dictates.��

The UAE is more flexible in this area. Here, when submitting an application for a licence, BNPL firms not opting for a restricted activities license will need to submit a recruitment plan with the projected number of employees, including those of UAE nationality.

The CBUAE has also said that it “may set specific requirements for the share of employees of the finance company who are UAE nationals”.��

Elsewhere in the world, the New York’s state governor committed on January 2 to introducing new BNPL regulation as part of a .��

As part of this, Governor Kathy Hochul will also propose legislation to require BNPL providers to get a licence to operate in the state, and to authorise the New York State Department of Financial Services to propose and issue regulations for this rapidly growing industry.��

“New Yorkers are increasingly turning to BNPL loans as a low-cost alternative to traditional credit products to pay for everyday and big-ticket purchases,” a statement from the governor said.��

This legislation and regulations will establish strong industry protections around disclosure requirements, dispute resolution and credit reporting standards, late fee limits, consumer data privacy and guidelines to curtail dark patterns and debt accumulation and overextension.��  

Other states such as California and Massachusetts already require firms to have a licence to provide short-term loans such as those under the BNPL umbrella.��