Rising concerns over their ability to pay back loans have discouraged many Filipinos from taking on more debt, according to a credit insights and scoring company.
TransUnion Philippines president and CEO Pia Arellano noted at a briefing on Tuesday that not all jobs shed at the height of the COVID-19 pandemic have returned, thus it was only logical that some 40 percent of the underserved market in terms of credit—those who seldom borrow or limit their additional financing—expressed “fear of losing control over finances,” and are therefore avoiding debt.
Referring to a study conducted by TransUnion, Arellano also cited high interest rates among the main factors discouraging Filipinos from taking out loans.
For the study, TransUnion surveyed about 2,000 Filipino consumers between Dec. 15, 2021 and Jan. 5, 2022.
“High interest rates mean that there is that fear that you will not be able to pay back,” she said.
In general, however, the TransUnion study revealed that over half of Filipinos simply do not want to borrow.
Arellano said there was the lingering notion that “credit is bad,” making the case for improving financial literacy in the country. Consumers must understand that lending could actually grow businesses, which will mean additional profits, she explained.
Other reasons why Filipinos do not borrow via financial institutions include the numerous requirements, long waiting time for approval and better offers from other institutions, the study noted. INQ