80% of Filipinos believe formal credit options have been more accessible – survey

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%, 42% 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% say their 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% 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%, followed by traditional banks’ branches (25%), digital banks (14%), offline NBFIs (13%) and apps or websites of traditional banks (9%). 48%, meanwhile, borrow from friends or family members.

Respondents cite the easy application process (60%), convenient repayment methods (50%) and high probability of approval (47%) 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%), application through mobile app (42%) and attractive interest rate (30%). Preferences are similar among all income groups and regions.

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

In terms of type of formal credit, personal loans were the most popular formal credit option, with 54% 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%), followed by credit cards (6%) and business loans (6%). Notably, 24% of respondents did not avail formal credit in 2023, an increase from 15% in 2022.

In terms of the amount of loans availed, 40% 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%. Moreover, 41% 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

57% of respondents intend to take out a new loan in 2024, while 19% of consumers already have plans in place to do so. 38%, meanwhile, indicate they will avail a loan if the need arises. Notably, 76% of Filipino borrowers are satisfied with their experience from formal lending institutions.

56% of respondents also cite online as their preferred channel for obtaining formal credit, compared to 37% 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% of respondents also stating that loan rates need improvement, 35% preferred a better repayment schedule, and 33% 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.