Demand for credit slowed down: these are the reasons, according to Banrep

The good dynamics of the demand for credit that was registered since 2020 and in most of 2022 slowed down in the last quarter, as decreases were observed for all portfolios.

(See: Disbursements for home purchase fell 37.3%).

That is one of the main conclusions of the Quarterly survey on the credit situation in Colombia cut to December 2022 made by the Bank of the Republic and in which 28 establishments that carry out credit operations participated: banks, financing companies and financial cooperatives.

The report mentions that this situation is consistent with the downward corrections in some segments of the credit supply and the greater requirements to grant them.
Likewise, the result of the survey indicates that credit institutions expect restrictive conditions in the future, therefore, to the extent that these trends are consolidated, lower credit growth could be glimpsed, especially in the portfolio to households, which has been recording significant growth.

(See: Banco Agrario prepares new lines of credit: this is how they will work).

Another notable aspect of the report published by the Banco de la República indicates that during the analysis period the financial burden decreased in banks and cooperatives, while it increased in financing companies.

For the fourth quarter of 2022, the perception indicator for credit demand of all modalities was in negative territory, a situation that had not occurred since September 2020.

The modalities that presented the greatest reductions in their balance were those of the portfolio to households (consumer and housing), which fell by 60 and 49 percentage points (pp), respectively.

(See: Interest boosted bank income, as of November 2022).

When analyzing the evolution of the indicator of change in the supply of credit establishments, it was observed that the indicator showed increases in the balance of the banks’ housing and commercial portfolios, while consumption registered a stable balance, and microcredit remained negative. .

For his part, the supply of credit from financing companies has decreased for households, remained constant for microcredits and increased for firms, mentions the result of the survey.

Cooperatives have reduced their supply of credit in all portfolios, with the exception of commercial, which registered a positive balance.

Another key aspect shown in the report is that the proportion of banks that increased their requirements in the allocation of new credits it increased in all the portfolios, with the exception of the commercial one, where the proportion remained stable in the last three months.

(See: Is paying a loan early always the best option?).

The results of the survey show that the financial burden indicator, which is defined as the ratio between the installments of consumer and housing financial obligations, and the income in a certain time horizon, a decrease is observed during the quarter of analysis for banks and cooperatives, despite remaining above 30%.

(See: Is it a good time to apply for credit?: This says an expert).

Instead, finance companies had a significant rally in this aspect, reaching an average indicator of 48.6%.

Regarding the factors that prevent or could prevent granting a greater volume of credit to the private sector, the entities continued pointing out that the ability to pay is the main obstacle.

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