Access to credit improved in 2023

CEBU, Philippines — Formal credit options have been more accessible for eight out of 10 Filipinos in 2023, according to a new survey commissioned by consumer finance company Digido.

Of the 80 percent, 42 percent say there are no changes to the degree of accessibility and claim to be usually approved when applying for formal credit, while the remaining 38 percent of the respondents are convinced that access to formal credit has improved in 2023 compared to 2022.

The survey indicates Filipinos’ lingering behavior of borrowing from both formal and informal sources.

At the time of inquiry, 57 percent of respondents had at least one outstanding loan from a formal lender, with non-bank financial institutions (NBFIs) with an online component making up 31 percent, followed by traditional banks’ branches (25 percent), digital banks (14 percent), offline NBFIs (13 percent), and apps or websites of traditional banks (9 percent). Meanwhile, 48 percent borrow from friends or family members.

Respondents cited the easy application process (60 percent), convenient repayment methods (50 percent), and high probability of approval (47 percent), as the key factors that have influenced their decision in applying for a formal credit source in 2023.

Other positive factors include convenient repayment schedule (43 percent), application through mobile app (42 percent) and attractive interest rate (30 percent). Preferences are similar among all income groups and regions.

Assessing their payment habits in 2023 compared to 2022, 64 percent of surveyed Filipino borrowers self-report that they always pay their loans on time, whilst 36 percent of respondents indicated that they have missed repayments.

In terms of type of formal credit, personal loans were the most popular formal credit option, with 54 percent of respondents having one in 2023 due to its flexibility and variety of use.

‘Buy now, pay later’ is the second most popular type of loan (12 percent), followed by credit cards (6 percent), and business loans (6 percent).

Notably, 24 percent of respondents did not avail formal credit in 2023, an increase from 15 percent in 2022.

In terms of the amount of loans availed, 40 percent of respondents report that the amount of loans taken out in 2023 decreased compared to 2022.

The share of respondents for whom the amount of loans has increased is at 28 percent.

Moreover, 41 percent of respondents would like to raise the borrowing limit, indicating a significant portion of demand.

Nearly eight out of 10 borrowers satisfied with formal lending with  57 percent of respondents intend to take out a new loan in 2024, while 19 percent of consumers already have plans in place to do so.

The survey further revealed that 38 percent indicate they will avail a loan if the need arises.

Notably, 76 percent of Filipino borrowers are satisfied with their experience from formal lending institutions.

Fifty-six percent of respondents also cited online as their preferred channel for obtaining formal credit, compared to 37 percent for offline channels.

Demand for online channels is highest in the National Capital Region and the middle income group, likely due to the higher standard of living and degree of digitization.

Room for improvement in terms of customer experience for all formal credit institutions remains, with 48 percent of respondents also stating that loan rates need improvement, 35 percent preferred a better repayment schedule, and 33 percent would like to use more repayment methods.

The survey had 1,500 Filipino borrowers that had formal or informal credit at the time of inquiry. An equal number of men and women took part in the survey, with respondents from all age groups (18+), income groups, employment groups and regions, suggesting the high reliability of the study results and applicability to the Philippine population as a whole.