Uruguay: Consumer credit struggles to sustain new growth phase

RIO DE JANEIRO, BRAZIL – The consumer credit market posted strong demand in the last stage of the year, albeit with fluctuations according to socioeconomic brackets, and with firm pressure from the supply side, in an economy that recovered significantly in April-June and July-September, although it is also struggling to sustain a new phase of generalized growth in the several activity sectors, according to Pronto! Consumer Credit Market Monitor (MMCC).

The survey reported an improvement in consumers’ expectations. It is the third time in which the proportion of people who see an upturn in the country’s economic situation has increased, and it is the fourth record of an increase in personal economic perspectives.

According to the report, the demand for loans and credits has evidenced a post-pandemic recovery, while at the supply level, there is a dynamic growth among the main market players, albeit reflecting the prudent behavior, differences in behavior among operators and the willingness to accept a higher level of risk in the granting of loans.

On the other hand, the survey notes that there is strong competition in terms of product promotions, access and rates, and even greater activity from non-traditional players, such as technological finance. Another particularity that stands out is the increased share of certain competitors such as banking institutions.

In terms of the evolution of default, although the latest figures show an increase of less than 1% among non-banking financial companies, the report notes that this is unevenly distributed by company, and may reflect specific situations.

In this respect, the monitor points out that the signs of stability in the labor market as well as the evolution of the macro context suggest that in the coming months no increase in default levels in the market should be expected, with the evolution of the market remaining stable.

HOUSEHOLD CREDIT MARKET

Household credit stock, measured in dollars, reached US$6.957 billion in November, according to Pronto! technical services’ primary estimate.

In turn, the evolution in constant pesos showed an improvement in recent months, with a year-on-year growth rate of 2.3% in real terms, according to the monitor.

FUTURE INDEBTEDNESS

In the quarterly market survey, which interviewed 860 people aged 18 and over living in Montevideo, Metropolitan area or Interior, Facebook and Instagram users, 77% of respondents mentioned having been affected in some way by the pandemic. A figure only slightly lower than reported in previous surveys.

Regarding future indebtedness, 36% of the total number of respondents stated their intention to contract a purchase order or a cash loan in the next 4 months. Among those who would borrow, 37% responded affirmatively to the question of whether they would be granted a cash loan if they were to apply for one today. On the other hand, 75% of respondents likely to borrow in the next 4 months said to be currently in debt.

As for the purpose of future loans or purchase orders, they would be mainly for home improvements (23.1%); paying other bills (21.8%); paying off loans or credit cards (12.1%); tackling the impacts of Covid-19 (7.5%); buying groceries (6.8%); paying electricity, water and phone bills (6.5%); among others.

Those who said they would not contract loans in the next 4 months stated that they would not do so because: they do not need it (32%); are not sure they could afford the installments (12.3%); do not like to incur debt (8.3%); do not want to incur more debt than they already have (6.1%); are unemployed or unstable employment (6%); among others.