Filipinos ‘credit hungry’ but have negative perception of debt

MANILA  -Unbanked Filipinos or those who are not accessing the banking system are “credit hungry” but are hampered by persistent negative perception of financing, seen as irresponsible overspending, according to the Philippine unit of American credit bureau TransUnion.

The Chicago-based, New York Stock Exchange-listed firm chose the Philippines for its inaugural Credit Perception Index.

To build up the baseline data, TransUnion surveyed 1,100 consumers from the general population as well as an “oversample” or additional 200 unbanked respondents and 200 small business owners between January and February 2023.

The study assessed Filipinos’ current attitudes and future openness to credit, examining their knowledge, trust and favorability toward credit and other financial products.

Pia Arellano, president and chief executive of TransUnion Philippines, said in a press briefing that lending activities among banks in the country has been seeing continued growth, but their reach has not kept up.

“They are lending to the same people. Those who access credit have done it before,” Arellano said.

Many Filipinos are held back by perceived stigma around credit or “utang,” and most still rely on informal sources—72 percent turn to family and friends—rather than formal credit systems, especially among the unbanked population.

The survey shows unbanked Filipinos rate their knowledge of credit significantly lower than the general population. Thus, they have less trust in credit.

Findings also show that the notion of credit is often associated with overspending and irresponsibility among consumers in the Philippines.

Among respondents, 57 percent believe that people acquiring credit products tend to overspend, and half think those who do are already in debt.

Also, 45 percent believe that these borrowers will eventually acquire unmanageable amounts of debt, and 42 percent think they will go to jail if they do not pay their debts.

Arellano said that Filipinos’ long-standing stigma and perceptions of credit may be due in part to the sources of their credit knowledge.

Most (67 percent) of Filipinos learn about credit products from their family and friends, followed by banks and financial institutions (61 percent) and financial advisors (42 percent).

Among the unbanked population, 69 percent learn from family and friends, but they rely mostly on Facebook (51 percent) and YouTube (45 percent) for financial education.