The emergence of COVID-19 and the subsequent lockdown in France which resulted in decreasing disposable incomes and rising unemployment in 2020, weakened consumer sentiment and strengthened the traditionally strong cultural aversion amongst the local population towards debt during a crisis. Up until March 2020, gross lending had witnessed steady growth, driven by demand for durables lending, home lending, education lending and other personal lending in particular.
Prior to the pandemic, auto lending had already been recording positive but undynamic growth in both outstanding balance and gross lending, with the category experiencing competition from auto leasing services with purchase options. Offered by financial institutions owned by or affiliated with major car manufacturers, these services – which are not included in the scope of Euromonitor International research – became increasingly popular as changing lifestyles and policies aimed at reducing urban congestion and carbon emissions make car ownership less of a necessity for many consumers.
Prior to the emergence of the pandemic, traditional banks in France were increasing their focus on the largest consumer credit category of card lending, with the latter showing renewed growth, while low interest rates limited returns from other credit products and services. This encouraged specialised subsidiaries of leading traditional banks – such as Crédit Agricole Consumer Finance and Société Générale’s Franfinance – to expand and enhance their card lending offers towards the end of the review period.
A second wave of COVID-19 which emerged towards autumn 2020 forced the French government to impose another national lockdown from 30 October until 1 December, which is likely to further weaken consumer sentiment and strengthen the French population’s attitude towards over-indebtedness, although those consumers still struggling financially may resort to applying for assistance. Rising unemployment over the year will continue to weigh on the repayment capacity of many households, particularly for those whose income directly depends in their activity such as craftsmen, where the debt ratio will be subsequently higher.
The rescue plan of EUR1.35 billion announced by Christine Lagarde (President of the European Central Bank) is expected to lead to a decline in consumer credit rates in France, a trend which is also likely to impact other countries in the EU, despite the rising cost of government debt.
Education lending remains underdeveloped in France. While tertiary education in France is widely subsidised (particularly universities and engineering schools), most business schools, which have seen rising enrolment numbers over the review period, are not.
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This report originates from Passport, our Consumer Credit research and analysis database.
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