Consumer Credit in Colombia

2020 IMPACT

COVID-19 exposes the vulnerability of many borrowers

Among the many negative impacts of the COVID-19 pandemic on Colombian society during 2020 was that it ruthlessly exposed the vulnerability of less affluent segments of the country’s population to financial distress. This has serious applications for consumer credit, specifically in terms of creating the pre-conditions for a significant expansion of non-performing loans and delinquent debt.

Access to credit narrows appreciably during the COVID-19 pandemic

The economic uncertainty that has emerged in Colombia in the wake of the COVID-19 pandemic has had a very negative impact on the ability of many consumers to access consumer credit. Inevitably, it has been less affluent consumers who have been hardest hit by the corrosive economic impact of the COVID-19 pandemic, with many low-income Colombians faced difficulties due to their revenues been derived from freelance work, informal commerce and short-term contracts.

Card lending boosted by 3-day e-commerce exemption from IVA/VAT

Faced with a massive slump in consumer spending at the peak of the COVID-19 pandemic during the second and third quarters of 2020, the Colombian government took the bold and unusual step of removing IVA (VAT) from all purchases completed online for a 24 hour period on three separate occasions during 2020. This temporary VAT exemption for online businesses can be seen as a form of economic reactivation.

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