Consumer lending continues to thrive amidst upbeat economy
The Philippine economy recorded a nearly 8% GDP improvement in the first quarter of 2013. This growth can be attributed to a steady inflow of remittances from overseas Filipino workers, upbeat consumer and business sentiment, the strong performances of the manufacturing and construction sectors, and continuous government and consumer spending. With much optimism, Filipinos from various social classes were enticed to take out loans to assist them in purchasing their first homes and vehicles, upgrading their existing dwellings and cars, and, for some, pursuing higher education. As a result, consumer lending experienced a robust performance in 2013.
Slight easing in lending standards attracts more Filipinos to borrow
There was a slight easing in lending standards because of improvements in borrower profiles and greater competition among various financial service providers. Mainstream lending institutions, in particular, further declined their interest rates and lowered minimum salary requirements for some of their consumer credit products to broaden their consumer market base and entice more Filipinos to take out loans. Despite the ease of borrowing money, banks closely monitored payments to minimise the occurrence of bad debts and decrease the percentage of non-performing loans.
Mainstream financial service providers remain the preferred lenders
Mainstream financial service providers continued to dominate the market, further increasing their shares in 2013. Domestic universal and commercial banks such as Bank of the Philippine Islands, Banco de Oro, Landbank and Metrobank remained major lenders, although more thrift and rural banks are expanding their businesses in consumer lending. Many Filipinos continued to prefer these traditional players due to their broad selection of products and their attractive interest rates, benefits and promotions.
Microcredit offers low-income households more borrowing alternatives
Together with the government, rural banks and microfinance institutions continued to educate Filipinos on microcredit. In the Philippines, micro loans are mainly facilitated through mobile phones because of the high ownership and efficiency in gravitating impoverished households towards the formal financial system by borrowing from mainstream lenders. The rapid expansion of BPI Globe BanKO – the country’s first mobile-based microfinance savings bank – across the country is a testament of success in terms of providing better credit options to the unbanked population, who often borrow from usurers that charge unreasonably high interest rates.
Strong performance is expected to continue in the forecast period
Consumer lending is projected to record double-digit constant value growth in terms of gross lending over the forecast period. Aside from the optimistic outlook of the Philippine economy, the continuous inflow of remittances from overseas Filipino workers, the increasing disposable incomes of the middle class and better financing packages from mainstream lenders are the other macro- and microeconomic factors that are expected to have a significant impact on the industry’s performance between 2013 and 2018.
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The Consumer Lending in Philippines market research report includes:
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