Jamaicans are securing personal loans in record amounts resulting in an imminent shift in the loan portfolio of banks.

Personal loans are approaching half of the total loan portfolio of banks, while loans for productive purposes, such as manufacturing, tourism, agriculture and construction, are reducing as a percentage of total loans.

At $167 billion, personal loans accounted for 46 per cent of total bank loans at the end of 2013, according to the latest Bank of Jamaica (BOJ) data. The year before presonal loans accounted for 43 per cent, which was up from 41 per cent in 2011.

A decade earlier, personal loans accounted for just one-third of total loans in 2004.

“The growth in personal credit for the review quarter (the three months to December 2013) was reflected in increases in credit card receivables up 4.9 per cent, term loans up 3.2 per cent and mortgage (home upgrade) loans up 5.2 per cent,” stated the BOJ in its quarterly Monetary Report issued last month.

Personal loans are offered on average at 24 per cent or double that of commercial loans, according to BOJ statistics, but that didn’t stop personal loans from growing by 22.7 per cent year-on-year, or nearly twice the pace of the total productive loans in 2013.

Jamaicans, however, are managing to service these loans, as debt not serviced for three months or more, otherwise called non-performing loans (NPLs), declined over the year. NPLs totaled $25 billion at December 2013 across banks, near banks and building societies, or a 12.9 per cent annual decrease — the steepest drop in three years.

“The decline in the ratio of non-performing loans was mainly attributable to loan write-offs, and to a lesser extent, repayment of non-performing business loans by a number of sectors,” stated the BOJ.

NPLs represent 5.4 per cent of total loans. The reduction indicates that NPLs are not a threat to the viability of the financial institutions as in the 1990s. During that era of financial sector collapse NPLs represented at times, half of the total loan portfolio.

In the December quarter, near-bank NPLs dipped 87 per cent to $120 million; followed by commercial bank NPLs down 11 per cent to $18.6 billion, and building society NPLs dipped 8.1 per cent to $6.2 billion, according to prudential indicators published by the BOJ.

Concurrently, bank loans increased 18 per cent to $362 billion followed by near-banks that increased 26 per cent to $7 billion and building societies up 1.6 per cent to $97 billion.