Jamaicans borrow more in September quarter - Cars, credit cards drive up household debt consumption
Published:Friday | November 22, 2013 | 12:00 AM
Partially influenced by declining borrowing rates, the loan market grew by J$16.7 billion in the September quarter, with the agriculture and tourism sectors taking the lion's share of business credit.
Personal credit, however, consumed $12 billion of the new loans, mainly used for car purchases and to finance credit card spending.
The central bank, in its Quarterly Monetary Policy Report for the July-September period, said loans and advances to the private sector grew at its fastest pace in six years at 5.5 per cent. That was more than double the average 2.3 per cent growth for the September quarters of the last five years.
The increase in loans for the review period was also affected by the one-off transfer of the existing loan portfolio of a building society to a commercial bank. FirtstCaribbean Jamaica merged its mortgage business into the banking operation and surrendered its building society licence in August.
The growth rate of personal loans, which was impacted by the FirstCaribbean trasanction, almost doubled from 4.9 per cent at September 2012 to 8.4 per cent at September 2013.
The appetite of businesses for loans was more modest than personal borrowings, although some sub-segments were more demanding. Tourism businesses borrowed $1.79 billion, followed by agriculture and fisheries with $1.72 billion, and professionals services with $1 billion in loans taken for the period.
LOWER INTEREST RATES
The Bank of Jamaica said that borrowings were somewhat influenced by a decline in interest rates for the period.
For the review quarter, the overall weighted average lending rate of commercial banks declined by 13 basis points (bps), following a reduction of 38 bps for the June quarter.
At end-September, the overall weighted average lending rate was 17.45 per cent.
The decline in interest rates on private-sector loans reflected a reduction of 49 bps on instalment credit. This followed declines of 40 bps in the June quarter.
The central bank notes that interest rates on all other categories of loans increased.
Growth in instalment credit for personal loans mainly reflected an increase of 21.3 per cent, or J$3.73 billion in credit for motor car purchases, the BOJ said.
The central bank said credit card receivables grew by more than five per cent or by J$1.28 billion in the review quarter, relative to just over two per cent for the September 2012 quarter.
Loan quality continued to improve, overall, with non-performing loans as a ratio of private-sector loans remaining unchanged at 6.4 per cent relative to the June quarter.
The stock of loans and advances outstanding at commercial banks totalled $355.8 billion at the end of September, an increase of 19 per cent relative to September 2012. Of that amount, credit to the private sector accounted for approximately 92 per cent, the PIOJ reported Wednesday.