Economic Crisis Causing Borrowers
To Fall Behind In Their Payments
The increase in interest
rates, inflation and the economic crisis is landing many individuals
and businesses to fall behind in their debt repayments, according to
figures released by the Superintendencia General de Entidades
Financieras (Sugef).
The Sugef report figures indicate that debtors in arrears of more
than 90 days has gone up considerable at the end of 2008,
representing a 1.49% of the total portfolio, much higher than the
1.21% in January 2008.
In plain terms, for every ˘1.000 colones lent, ˘14.9 are in arrears
over 90 days or are in judicial recovery.
Individuals with consumer loans and credit card balances are the
group that make later payers. Also many individuals and businesses
with construction loans lead the arrears, the Sugef report shows.
The state banks are the most affected by the late payment.
Mario Rivera, general manager of the Banco de Costa Rica (BCR),
explained that the state banks are the financial institutions with
the greater number of loans, lending more than the private banks,
and thus have more arrears to deal with.
Rivera added that the private banks are more selective in handing
out loans than the state banks and as such do not have the high rate
of late payments as the state banks.
The Banco Popular, the smallest of the state banks, according to the
Sugef has the highest late payment rate.
Gerardo Porra, general manager of the Banco Popular, said that the
bank has felt the increase in lat payments in the last several
months and even though a client may be up to date with his bank,
they may be in arrears at other institutions and vice-versa,
complicating the situation.
One of the major problems causing the late payments is the rise in
the prime rate. Many loans are based on the base rate and the
increase from 4.25% in May 2008 to 11.5% in December, has caused
many to not be able to meet their financial commitments.
The Banco Central (Central Bank) lowered the rate to the minimal
historic levels last year to avoid speculation from the exterior,
but the rates were too low, below inflation, and could not be
sustained.
The Central Bank felt that if the rate was kept too low for too long
a period it would discourage savings and over stimulate consumer
consumption.
The high inflation rate last year also forced many debtors to devote
more of their resources to daily spending and less to meet their
debts obligations. |
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