Bank Credit to Individuals Sees Decline for Second Consecutive Year
The volume of bank credits to individuals has decreased, a phenomenon that seems to be repeating itself for the second year in a row. As of the end of March 2024, the total volume of loans stood at 28,601,823 Mtnd, a decrease of 59,617 Mtnd compared to the end of December 2023. Last year, the decline was 84,053 Mtnd.
Compared to the end of March 2023, there was a significant increase of 651,737 Mtnd, thanks to the surge in demand for financing during the April-June 2023 period, during which the outstanding balance increased by 442,274 Mtnd. It's too early to comment on the effect of the interest rate hike, as we are still operating within the same framework as in 2023.
By category, we observe that the outstanding balance of consumer credits stood at 4,713,094 Mtnd, an increase of 14,980 Mtnd compared to December 2023. Demand for this type of financing remains high, allowing individuals to cover urgent and unexpected expenses or make small personal investments. In other words, it replaces savings that have not been built up due to the erosion of purchasing power.
Home improvement loans totaled 10,610,441 Mtnd, a decrease of 63,460 Mtnd since the beginning of the year. This trend was also seen last year during the same period. The surge in raw material prices and labor costs, as well as the lack of specialized workers, explains this trend. It's also worth noting that these credits are used for consumption, especially for small amounts.
Mortgage loans saw a slight increase in outstanding balance, from 4,131 to 12,872,908 Mtnd. This is another illustration of how the real estate sector is struggling. Who can afford a house with an interest rate in the double digits? For comparison, during the first three quarters of 2022, when interest rates were slightly better, the progression was 135,582 Mtnd.
Vehicle loans continue to decline, with an outstanding balance of 392,705 Mtnd. Finally, university credits stand at 12,675 Mtnd only. This is a niche that is developing, but it is far from influencing or reflecting the overall trend.
The conclusion is that the ability to repay bank credit installments is decreasing from one year to the next. It's time to think about alternative financing mechanisms with rational costs. We've seen the rush towards social fund credits. The needs are in the billions of dinars, but not at this price.