Monday, April 25, 2011

The War of Debt is On!

The rate of consumer credit defaults in the Philippines is almost triple the average in Asia (Malaya (2008))
  • ·         Consumer loans accounting for only about 10% of total bank lending and less than 5% of GDP.
  • ·         Philippines is a consumer-driven economy, which creates strong demand for consumer loans, with personal expenditure making up 77% of GDP (Fitch Ratings (2006)
  • ·         High delinquency rates have accompanied the growth of retail lending, especially unsecured lending, where overextension of credit to low-income earners has resulted in a non-performing loan (NPL) ratio of almost 20%.
  • ·         Credit cards provided by the banking industry are an emerging source of household credit in the Philippines.
  • ·         About 3% of the 5,000 sample household respondents have a credit card and around 4% expect that a household member will apply for a credit card within the next 12 months.
  • ·         Total credit card receivables (CCRs) outstanding of universal/commercial banks and thrift banks, inclusive of credit card subsidiaries, reached PHP 116.1 billion at end-December 2007
  • ·         Of the total CCRs, PHP 16.518 billion, or 14.2%, was past due as of December 2007, compared with 14.3% (PHP 15.199 billion) in the third quarter of 2007
  • ·         The trend in past-due CCRs could mean that more credit cardholders are having difficulties making their payments on time.
  • ·         The rate of consumer credit defaults in the Philippines is almost triple the average in Asia (Malaya (2008))
  • ·         On average, consumers end up paying a 3.5% rate per month, or 42% per annum, including the basic interest rate, fees and charges. 

  • The way I see it, the Philippines is really a consumer market. We have been programmed to be consumer minded  rather than investor minded people. The way out of debt is to discipline ourselves in managing our finances well. We must be buying on cash basis from the savings made. Avoid using your credit card and free yourself from the 3.5% interest per month.

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