JN Bank has rolled out a new “Help” loan which offers an upper limit of $5 million to Jamaicans who are considering refinancing their debt.

The refinancing market is one of the spaces in which local commercial banks are seeking new business as consumers reverse the borrowing behaviour that was seen pre-COVID-19 and also seek to reduce the size of existing debt repayments.

Borrowing in 2020 was tempered compared to previous years. In the third quarter of 2020 the central bank said household debt to disposable income ratio increased, which reflected a larger proportional decline in disposable income relative to the decline in household debt for the review period.

In addition, households’ net financial position to gross domestic product (GDP) ratio increased over the review quarter.

JN Bank pointed out that there has indeed been a rise in household debt, although this is not as much as expected under COVID conditions.

It was noted, “We do not have figures to support the national picture regarding the number of persons who are now insolvent due to the impact of COVID-19, however, the Bank of Jamaica’s Financial Stability Report for 2020 points to a growth of 3.4 per cent in debt among households in 2020, which is a much lower growth in household debt when compared to the previous year.”

Consumer borrowing behaviour has hit reverse speeds since COVID-19. Two years ago, a 2019 report noted that Jamaican households were servicing three times more debt than ten years before.

The Bank of Jamaica (BOJ) reported then that $56.60 of every $100 of household income goes towards the servicing of personal loans, an all-time high.

It was noted in the Financial Stability Report 2018 that consumer loans were growing three times as fast as income, each year, with the BOJ stating that total real household debt to real disposable income has trended upward, reflecting increasing indebtedness.

Now, however, consumers are taking a more sober approach to debt, since many have had to request moratoriums under COVID-19 conditions. Banks themselves have become more choosy in relation to granting new personal loans.

In the Bank of Jamaica’s 2021 Macroprudential report, it is noted that the ratio of household non-performing loans (NPLs) as a share of household loans by the deposit taking institutions (DTI) sector declined marginally by 0.2 percentage point to 3.7 per cent at end April 2021, relative to end 2020.

The report states that this performance may have been related to the ongoing effects of the loan deferral arrangements, as well as other credit risk mitigation strategies by the DTIs.

As at April 2021 personal loans, which are used as a measure of household debt and which reflects consumer and mortgage loans, continued to account for the largest share of the DTIs’ loan portfolios.

Personal loans increased by 2.5 per cent at end April 2021, relative to end 2020. At end April 2021, consumer loans continued to account for the largest share of household debt. There has also been a trend increase in residential mortgage loans as a share of household debt.

However, credit risk associated with the system’s exposure to households appeared to remain contained, the BOJ said.

A company response said that the JN Bank Help Loan “provides consumers with rates that are lower than rates currently in the market and longer repayment terms so that they can benefit from lower monthly payments and, therefore, have the opportunity to maintain a livable disposable income and cash flow monthly”.

The product is being offered to Jamaicans 18 years and older who are either salaried or self-employed, with debts external to JN Bank and who satisfy lending requirements.