ELEVATED INFLATION will be a key risk for the microfinance industry and its customers this year as customers will find it more difficult to pay their loans, officials of a financial technology firm said.
“We’re sort of seeing that this year, but we already saw a ton of it last year when inflation was continuing to increase. The December and January period had really high inflation. We’re hoping that dissipates towards the second quarter,” Tala Philippines General Manager Donald C. Evangelista said in an online media roundtable on Thursday.
“Inflation always poses a double challenge because a customers’ money goes less far. They wish they could get more loans but also, they have less money because of the costs going up everywhere. They have less to repay,” Tala Chief Risk and Strategy Officer Kunal Om Kaul said.
Mr. Kaul added that understanding customers’ situation is key as companies should find a way to be flexible, as much as possible.
“There are more unplanned expenses because of inflation. That is another challenge that the microfinance industry faces because you want to help the customer, but you also worry about their ability to repay,” he said.
Cybersecurity is also a key issue as Filipinos are hesitant to transact or use their data online.
“Admittedly, one of the challenges faced by the Tala loan app in the Philippines is the people’s perception of cybersecurity. which is pretty weak at the moment. Many Filipinos will not even try an online lending platform because they are concerned that their data can get compromised or stolen,” Tala Customer Experience and Collections Senior Director Iona Iñigo-Mayo said.
“There’s already a sizeable level of concern over the security of one’s financial information and high rates,” Mr. Evangelista likewise said.
He added that Tala Philippines has been working with regulatory bodies in the country, such as the Bangko Sentral g Pilipinas (BSP), Securities Exchange Commission (SEC), and the National Privacy Commission, to help improve data privacy.
Predatory lenders taking advantage of customers is also a key concern for the industry, Mr. Evangelista said.
“In the Philippines, predatory lending remains a huge problem for the industry. Government regulators have been addressing this in various ways and the BSP imposed an interest rate ceiling and fees on small value loans. The SEC, on their end, were increasing the requirements for digital lending app registrations,” he said. — A.M.C. Sy