To leverage consumption, Sergio Massa has recently launched a package of measures he is looking for reduce costs and extend funding limitsboth legs beaten by rising inflation and rate hikes, Argentines still have “room” to get into debt, as in recent years they have reduced the stock of credit they take, especially households.
This is Argentine families who choose to finance themselves do so every time for smaller amounts. According to the latest report on financial inclusion by the Central Bank, as of December 2022 almost all, more than 99% of the adult population had an account with a financial institution. Of this universe, 54.3%, about 19 million people, had access to some type of financing.
The report shows that in the last two years the number of people who have been able to access some type of loan to finance their expenses has grown significantly, although in the last year the balance of these credits contracted sharply. There are several reasons that explain this phenomenon: on the one hand, because the pandemic, the fintech boom and other companies that provide finance make it easier to reach users who were previously marginalized by the formal financial system.
On the other hand, during that same period soaring prices strongly affected the purchasing power of wages, which in turn had an impact on higher interest rates for the economy, making credit much more expensive. On average, again on the basis of official data from the Central Bank, People’s debts were $62,000 in December 2021, an amount that dropped to $50,000 in December of last year.
Being an average, these numbers take into account the level of indebtedness of people with blank incomes, the self-employed, but also pensioners and retirees. The Centrale report shows that, in any case, a significant reduction in financed balances is recorded in these three groups.
Ecoviews economist Andrés Borenstein said: “Argentine households are super deleverage compared to any historical model. Right now nobody has a mortgage, which means that compared to the American, Brazilian or Chilean family, the Argentine family has little debt. This has to do with the depth of the financial system and the informality of the work.”
It is true that the level of “use” of the credit lines by those who can finance themselves from the bank and those who are excluded from it and have to resort to other players is very different. According to central calculations, 33% of Argentines obtain financing from a bank, compared with 28% of people who managed to do so through a non-financial lender.
Banks grant a 4.3 times greater stock of credit than non-financial players, although the range of options in these regulated entities is broader, ranging from personal loans, overdrafts, lien and mortgage loans. As of December last year, private entities financed 9.4 million people, while public banks granted credit to 4.8 million Argentines.
Meanwhile, banks, non-bank credit card providers and fintechs have seen the amount of loans taken out by their customers decrease as interest rates rise, In the so-called “financial companies”, which usually require less requirements from their customers and charge a higher financial cost, these amounts have increased.
Younger adults, between the ages of 18 and 21, and adults over 65 are those seeking financing for smaller amounts. Adults between the ages of 30 and 64 who work in a dependent relationship and collect their salary from banks are the ones who receive the most funding.
The rate hike had a strong impact on personal credit lines and, to a lesser extent, on credit card financing costs, and it is for this reason that these, while decreasing on a year-on-year comparison, continue to be the form of financing preferred by households.
Another data from the Central, more recent, shows that despite the pockets affected, the level of bank arrears, of people who do not respect their payments, remains low compared to other countries in the region and the peaks recorded in the first months of pandemic: irregularities in families represent 3.3% of GDP.
Charles Arterburn is a seasoned business journalist for News Rebeat, where he provides comprehensive coverage of the latest trends and developments in the world of finance and economics.