Current quota system based on quantity is affecting competitiveness

Noura Abbas Ahmed

Throughout the past few decades, the banking and insurance sectors have played a pivotal role in the United Arab Emirates’ economy. The steady growth of both these sectors has been instrumental in the major transformation of the financial landscape in the UAE.

In addition to their business commitments, they have played an exemplary role in supporting the government’s Emiratisation initiatives. This includes the quota system currently in place which mandates that these institutions should employ an allocated percentage of Emiratis in their workforce.

The current quota system, especially in the banking sector, has been largely successful in attracting Emirati talent to the industry. The numbers are a clear testimony to this fact. Various studies have shown that the preference among Emiratis to work in the public sector leaves the private sector with a low talent pool, which is just around 10 per cent of the Emirati workforce.

Despite the odds, it is heartening to note that banks and insurance companies account for more than 50 per cent of the Emiratis working in the private sector. That said, we have noticed that the growth of UAE nationals has plateaued, and in addition, various stakeholders have expressed concerns that the current quota system emphasises predominantly on quantity — rather than the quality — of the jobs created. The ‘one size fits all approach’ in the form of a fixed percentage is also affecting the competitiveness of these industries.

Changing the system

It is due to these concerns that the banking and insurance sectors are set for a major change — with the implementation of a new strategy identified as the ‘point based system’. Having been approved by the UAE Cabinet, this truly transformational strategy emphasises on achieving employment generation and talent development. It is our belief that the new system will enable quality job creation, benefiting all stakeholders, in addition to ensuring that industry competitiveness remains unhindered.

At the Emirates Institute for Banking and Financial Studies (EIBFS), we have worked closely with the Ministry of Presidential Affairs, the UAE Central Bank, and the Insurance Authority, to guarantee a swift launch of the new system in January 2017. We have been overwhelmed by the proactive involvement of top management from both banks and insurance companies for the initiative.

In fact, throughout the past six months we have conducted a series of training sessions for the majority of local banks and insurance companies informing them of the new points system before its implementation. The new system has been greatly appreciated by them, and the regulators have taken many suggestion on board while fine-tuning the final guidelines.

How does it work?

Following its launch, all banks and insurance companies operating in the UAE will be allocated their Emiratisation target points by the Central Bank and Insurance Authority respectively. The system offers a distinct feature, where target points for banks are based upon operating income, and insurance companies’ target points will be based on gross written premiums. This ensures a high level of fairness, as smaller banks would have lower targets and larger banks would have to achieve higher targets — a remarkable shift from the current model.

After they receive individual targets from their respective regulators, banks and insurance companies will have two major tools to help achieve their targets. These are referred to as the ‘input’ and ‘output’ points under the point system.

The ‘input point’ tool rewards the training and development effort made by these institutions in developing the skill set of their Emirati workforce. This is measured using a quantitative methodology based on the investment made in training their Emirati employees. This is a paradigm shift from the quota system, as the banks and insurance companies receive their due reward for their effort, and get further incentivised for developing the skill sets of their Emirati employees.

The ‘output point’ tool, measures the rewards based on actual job creation and the quality of jobs being created. The banks and insurance companies can score high points under this parameter if they have Emiratis working in senior and mid-level positions rather than the non-managerial roles. For instance, an Emirati in a senior management role fetches five points to the institution, while an Emirati in a non-managerial role fetches just one point. Through this method, institutions are further encouraged to develop the skill sets of Emirati employees so that they can move up to higher level roles.

The Emiratisation outlook

Additionally, another key highlight of the system is that institutions will attain double rewards in the form of points — for every Emirati employee who occupies a “critical position”. Critical positions are roles specified by the Central Bank and Insurance Authority which range from entry-level positions to higher roles in select departments.

Today, a large majority of Emirati employees work in entry-level positions in retail banking roles, with no scope for advancement. By implementing this mechanism, Emiratis can progress beyond entry-level positions.

In closing, the new point-based system should prove to be a significant motivator for Emiratis in the financial sector to excel in their line of work and attain higher level positions — thus contributing to the nationalisation efforts and human capital goals initiated by the Government.

The writer is Director of the Training Department at Emirates Institute for Banking and Financial Studies.