Households saving more

The Bank of Jamaica (BOJ) has indicated that it is comfortable with the level of household debt, although the stockpile of consumer loans is growing in the island.

Financial liabilities for households include consumer loans and mortgage loans.

Meanwhile, credit card receivables in domestic currency, which is inclusive of household spending, have almost doubled in the last three years.

The central bank was asked about the increase in household debt and credit card receivables in light of a possible recession.

The BOJ restrained its response to the impact of household debt, noting, “Jamaica’s household credit-to-GDP ratio is relatively low and stable. The ratio of household debt-to- GDP in Jamaica stood at just over 33.0 per cent at the end of 2022”.

The BOJ added: “In other Caribbean and emerging market countries, the ratio typically ranges between 40.0-60.0 per cent. The non-performing loans (NPL) ratio for the banking system was 3.2 per cent at the end of September 2023, remaining relatively constant and well below the 10.0 per cent regulatory benchmark.”

Credit card receivables, meanwhile, as at September 2023 were $75.49 billion, the total including $66.96 billion in domestic currency.

For the similar period in 2022, receivables as at September were $66.02 billion, including $58.51 billion in local currency.

Comparatively, in 2021, credit card receivables at September was $55.38 billion, including $48.9 billion in domestic currency.

The receivables in Jamaican dollars have almost doubled in the last three years.

The BOJ, from its macroprudential report, is content that the financial assets of households are in excess of their liabilities.

The financial assets for households include pension holdings, deposits, retail repos, life assurance and annuity contracts, and policyholder funds on deposit.

In its last report, the BOJ stated: “Deposit-taking institutions’ (DTI) exposure to households, as measured by the ratio of household loans-to-DTI assets, was broadly constant during the June 2023 quarter, although the relative importance of this exposure continued to shift in favour of mortgages.”

Overall, household loans continued to account for the largest share of the DTIs’ loan portfolio. Within households, residential mortgage loans increased by 3.1 per cent over the June 2023 quarter, contributing to the 2.1 per cent overall growth in household loans.

Personal loans fell over the June 2023 quarter to 52.4 per cent, continuing the trend decline from the 55.8 per cent that was recorded at June 2021.

“Improvement in households’ net financial position was due to a faster increase in households’ assets, relative to their liabilities,” the BOJ stated in its report.

The increase in households’ net financial position, and more specifically household assets, was primarily due to an increase in customer deposits, it was said.

The BOJ noted, meanwhile, that the performance in deposits could be attributable to higher rates being offered on client holdings.

avia.collinder@gleanerjm.com