Filipinos borrowing more due to inflation, pandemic

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FILIPINOS are incurring more debt as inflation continues to rise and due to the impact of the coronavirus pandemic. — BW FILE PHOTO

FILIPINOS are borrowing more due to lower income and rising expenses amid high inflation and the lingering impact of the pandemic, according to a survey.

“The concurrent decline in income and growth of expenses amongst the Filipino population has led to accelerated interest and use of borrowing in the past 12 months,” consumer finance company Digido said on Wednesday.

“The financial gap is further exacerbated by the growing material wants and needs. In essence, credit is the only means of breaching the divide. Loans, both formal and informal, continue to notably grow in popularity,” it added.

The study said the current expenses of Filipinos are increasing.

Based on the report, 55% of respondents reported increased spending in the last 12 months while only 5% saw a decrease.

Of the age groups surveyed, the majority of Generation X respondents (31 to 49 year olds) said their expenses increased.

“Generation X stands out against the rest, with an optimal fusion of material well-being and consumer activity. They in particular account for the majority of the increase in demands,” it added.

Digido said growth in household spending is due to the “natural expansion of requirements for the quality of life among the population and the cumulative effect of the pandemic-related underconsumption and the influence of rising inflation.”

Headline inflation in October accelerated to 7.7%, mainly driven by rising food costs. In the 10-month period, inflation averaged 5.4%.

In terms of income, 41% of respondents reported a decrease in their earnings.

Of these respondents, 29% said their income decreased “significantly.” On the other hand, only 27% reported an increase and 21% said their income level remained the same as before.

“The results make it clear that the shift of the population towards lesser financial well-being, influenced by the COVID-19 pandemic and exacerbated by inflation, is indeed taking place,” Digido said.

The study showed the main reasons for the change in income over the past 12 months were shifts in additional earnings and changes in salary.

“What is notable about that, is that the majority of respondents claiming both of these factors also reported an increase in their income. In regards to its reduction, the reasons turned out to be predominantly more cardinal: a change in employment status, position and place of work,” according to the study,

The decline in income and rising expenses also led to more borrowing.

“The predominant growth in expenses and the reduction in the income have led to growing demand for credit among the respondents,” the study said.

It showed 22% of respondents considered borrowing more frequently than before, 13% used loans or plan to continue using loans in approximately the same amount, and 10% applied for more loans.

Meanwhile, 12% claimed to avoid official loan sources entirely, 11% no longer considered taking on credit as frequently, and another 9% began to cut the number of loan applications.

“Of course, it would be easiest to attribute such results solely to the growth of financial literacy of the population, which is indeed on the rise. However, this hypothesis is insufficient, as the previously mentioned respondent data shows that the decrease in incomes noticeably prevails over their growth,” it added.

In an assessment of their financial situation, 26% of respondents said they were “in dire need of money” and 24% said that “money is enough only for essentials.”

“The results of the study reaffirm the previously established negative impact of the COVID-19 pandemic and lingering high inflation on the material well-being of Filipinos,” the study added.

The firm noted that the survey had 130 respondents which were all Digido clients and had previous experience in online borrowing. The survey was conducted between October and November. — Luisa Maria Jacinta C. Jocson