Consumer and business loans trended upwards last year, despite the efforts of the Bank of Jamaica (BOJ) to slow borrowing through rate hikes.

Data released by the BOJ on Wednesday showed that both personal and business loans trended upward for the year 2023, despite a marginal dip in the overall value of credit extended to consumers across Jamaica’s 11 deposit-taking institutions (DTI).

As at December 2023, credit to micro, small, and medium-sized businesses (MSMEs) jumped from 4.7 per cent of gross domestic product (GDP) in 2022 to 5.4 per cent.

“Year over year, there was a 32.3 per cent increase in the loans extended to MSMEs. There were increases in credit provided to all business sizes, with increases of 19.2 per cent, 15.2 per cent, and 64.0 per cent for micro, small, and medium businesses, respectively. The growth in loans to MSMEs outpaced the growth in economic activity,” the BOJ said in its report.

Meanwhile, there was a 2.3 per cent increase in the number of loan accounts as at December 2023 when compared to December 2022. The number of loan accounts climbed from approximately 625,900 to 640,300 loans.

The BOJ said the largest increases in loan accounts were seen in loans extended to local residents, that is, personal loans and business loans extended to distribution, agriculture, and professional and other services sectors.

However, there was a decline in DTI credit as a percentage of GDP from 48.7 per cent to 47.5 per cent as at December 2023 when compared with the same period in 2022. The downward movement was, in part, attributable to a decline in mortgage loans year on year.

For 2023, there was a 5.9 per cent decline in the value of new mortgages and a 13.3 per cent decline in the volume of new mortgage loans when compared to 2022.

“This signalled a slowdown in the pace of growth in both the volume and value of mortgages for the period when compared to the same period in 2022,” the BOJ said.

It added that a contributing factor was its continued policy actions towards the slowdown in credit growth by facilitating an increase in market interest rates since September 2021 to control inflation.

The BOJ has kept key interest rates steady at 7 per cent since 2022 on concerns that inflation will move outside of the prescribed range of 4.0 to 6.0 per cent. DTIs responded by hiking interest rates on existing loans while adjusting rates on new loans.

“You may observe an increase in your monthly mortgage payments as a result of a recent rate adjustment which took effect on February 6, 2023, and communicated to you via letter or e-mail in December 2022. We, therefore, encourage you to review your account at this time as your standing order or salary deductions may require updating. If your account is not adequately funded to accommodate the additional amount, this can negatively impact your repayment history and generate a late fee,” Scotiabank said in one of its advisories to clients.