Ease in credit conditions in loans market


Ease in credit conditions in loans market

• Credit supply growth accelerating

Observer writer

Wednesday, July 10, 2019

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There has been an easing in the overall credit conditions to the private sector during the March 2019 quarter.

The Bank of Jamaica (BOJ) reports that the easing of credit conditions was fueled by more accommodative price and non-price lending policies applicable to both secured and unsecured lending. For secured loans, lenders reported lower interest rates, lower fees, and increased maximum loan-to-value ratios.

In its latest Quarterly Credit Conditions Survey Report, the BOJ states that the improved conditions for unsecured loans were evidenced by reports of reduced interest rates, lower fees on credit card and non-credit card loans and increases in credit card limits.

The March 2019 Quarter Prepared by the BOJ's Monetary Analysis & Programming Department Research & Economic Programming Divisions showed that ”credit conditions faced by all business sizes during the March 2019 quarter eased, with the exception of micro businesses. This easing was mainly evident in the market for personal loans.”

According to the report, “lenders reported that they expected credit conditions to continue to ease in the June 2019 quarter. This outlook reflected the expectation for lower interest rates and lower fees for both secured and unsecured loans. “

The BOJ says secured loans are also expected to benefit from increased credit lines and lower collateral requirements. “The prospective easing of credit conditions for unsecured loans was also attributed to eased loan covenants and reduced loan monitoring requirements,” the report notes.

The survey is conducted online on a quarterly basis among commercial banks, building societies, near banks, credit unions and development banks. It is designed to elicit qualitative information on changes in the demand and supply of credit to various types of businesses as well as individuals.

The March 2019 survey was conducted between 15 April 2019 and 06 May 2019.


Growth in credit availability during the March 2019 quarter, as measured by the Credit Supply Index (CSI), accelerated when compared to the previous quarter. The CSI increased to 106.1 from 101 in the previous quarter and primarily reflected an increase in credit made available to individuals.

For businesses, the acceleration in the growth of local currency credit made available reflected increased availability to the Distribution, manufacturing, tourism, transport, storage & communication, and agriculture & fishing industries. In relation to foreign currency loans, there was an increase in the credit made available to the tourism, electricity, gas & water, Distribution, and Agriculture & fishing industries.

The survey points to a decline in the allocation of credit to businesses for the March 2019 quarter relative to the previous quarter. “The share of credit allocated to micro, small and medium-sized firms increased at the expense of large firms. Notwithstanding, large businesses continued to account for the largest share of business loan portfolio at end-March 2019”, the report points out.

Lenders say they plan to increase the amount of credit made available to both businesses and individuals for the June 2019 quarter.


Average indicative loan rates on new personal loans offered by participating institutions declined for the review period to 17.06 per cent, down from 18.31 per cent in the previous survey. Lower rates for the review quarter were evident in all categories except other secured loans.

The report highlights that interest rates on motor vehicle loans and other unsecured loans saw the greatest reductions. For the June 2019 quarter, lenders anticipate a planned reduction in interest rates of 13 basis points to 16.93 per cent.

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