The COVID-19 pandemic disrupted the Israeli economy during 2020, resulting in economic uncertainty, high unemployment, reductions in household incomes and widespread financial hardship. The impact of this on the various different categories of consumer credit tended to vary.
The economic uncertainty and high employment that flow from the COVID-19 situation during 2020 resulted in widespread financial hardship among the Israeli population. While this resulted in dramatic declines in consumption and in particular non-discretionary spending, it also pushed many people towards consumer credit as a way of shoring up their flagging finances and ensuring consistent liquidity during periods of inconsistent cash flow.
Card lending had an interesting year in 2020 as outstanding balance increased substantially, while gross lending registered a not insubstantial decline. The explanation for this seemingly anomalous situation is that many Israeli consumers turned to their charge cards and credit cards as a source of easy, relatively low-cost credit as their incomes came under pressure at the peak of the COVID-19 situation.
The forecast period is set to see a positive performance for consumer credit in Israel, with robust growth expected in both outstanding balance and across lending terms. The Israeli economy proved worryingly unsteady under the pressures created by the COVID-19 pandemic and there have been widespread concerns that the government response to the adverse economic environment that emerged during the year was not efficient or effective enough.
One major factor which is expected to benefit the development of consumer credit during the forecast period is the strong emergence of Israel’s fintech sector. Recent years have seen a proliferation in technologies that promise to revolutionise the way in which loans are offered, the processes that determine the creditworthiness of potential borrowers and the interfaces between finance companies and consumers.
One outcome of the widespread financial hardship that emerged from the COVID-19 situation during 2020 is that it brought the high levels of personal debt that exist among the Israeli population into sharp focus. While Israel has traditionally been a country in which consumers have been reluctant to take on high levels of debt, recent years have seen a substantial increase in the cost of living, while wage increases have not kept pace with the rate of inflation.
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This report originates from Passport, our Consumer Credit research and analysis database.
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