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ability and willingness of people to borrow last year / Article / LSM.LV



By 2018 the lending rate for individuals has grown almost as fast as a year ago, but the willingness and capacity of the Latvian borrowing population has experienced the largest increase in the last three years, according to the Financial Industry Association in the private segment.

This was positively influenced by the overall economic growth of the country, which increased financial stability and optimism of the population. It is true that those living in Latvia are still moderately cautious, and their ability to take credit is greater than their willingness to do so, the media industry statement said.

According to the results of the index developed by the Financial Industry Association in 2018, loans to the retail segment remained positive, going from 104 points in 2017 to 107 points last year. Growth was only slightly slower than a year ago.

By assessing people's ability and willingness to borrow, it recorded the fastest growth in 2018, pushing the index to 123 points (+15 points) and 111 points (+9).

"Although the conditions for lending to individuals have not changed significantly over the previous year, the number of people who want to take loans, for example, wanted to buy housing with the help of a loan, has steadily increased. It is clear that some of the state's activities also played an important role, for example, in 2018, the Altum Housing Support Program was expanded, allowing a loan not only for families with children, but also for young professionals ", explained the Sector Financial. Ainars Balcers, Co-Chairman of the Association's Loan Committee, Head of the Department for Support of Real Estate Credit in the Baltic States, Swedbank.

He also pointed out that despite the growing willingness to borrow, citizens are increasingly weighing their options and making a credit decision considering their long-term impact on the household budget. This shows that public awareness of responsible lending has improved.

The financial sector association's credit industry index in the consumer segment shows that the year 2018 also brought changes in the financial sector. The ability of commercial banks to lend last year decreased by 8 points, which was influenced both by structural changes in the banking sector and by changes in the business strategies of individual banks, resulting in a decrease in bank deposits.

At the same time, the risk appetite and the requirements for individuals did not change during the previous year, so banks' willingness to lend remained at last year's level.

The Financial Sector Association evaluates the loan market and certain segments of the market, as well as working with partners from the state and non-state sectors to promote a more favorable environment. Last year, a proposal was also developed to improve the study and student loan system. "At the end of last year, the study and student loan portfolio totaled approximately € 64 million, which is a rather modest indicator, for example, of the amount of consumer loans for young people of study age. According to research data with students, 50% of students already considered student and student loans as a way to cover study costs or everyday. At the same time, almost half of them did not even apply for this type of financial support, including the inability to find a private guarantor. This proves the need to improve state-guaranteed study and student loan system by making Latvian higher education simpler and more efficient, accessible to all who so wish, "explained Kārlis Danēvičs, co-chair of the Finance Committee of the Association of Financial Sector, SEB banka.

The Financial Industry Association lending index in the retail segment is a unique and complex measure that characterizes the ability and willingness of the Latvian population to borrow, as well as the ability and willingness of the banking industry to lend. In total, 14 different indicators were analyzed, such as late payments, changes in the unemployment rate, participation of the parallel economy, financial data of the banking sector, consumer sentiment and so on. c., thus creating a complete picture of the complexity of credit as the motor of the economy. The financial sector association developed the index working with a number of leading Latvian experts in the field of economics and credit, as well as examining the best examples of international practice.


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