Bank Loans become Less Expensive in Nicaragua

Between May and June of this year, the average lending rate of commercial banks has fallen from 11.52% to 10.28%, a drop that is explained by the high level of liquidity of the banks and the low placement of credits.

Thursday, September 24, 2020

The pandemic that caused the outbreak of covid-19 has hit the financial system, since due to the current market conditions, the active rates have come down between the months of May and July.

See "Financial Services: Business Potential in Central America"

Figures from the Central Bank of Nicaragua detail that in May the average lending rate of commercial banks was 11.52%, in June it was reduced to 10.79% and in July it fell to 10.28%.

According to representatives of Funides, "... with the pandemic, credit requests decreased and with this, a greater supply of liquidity is created, 'so if deposits continue to grow and there is nowhere to place those deposits, then yields go down, this can also be associated with international rates, because in March they went down."

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Another factor that could be influencing the volatility of passive and active interest rates is the degree of uncertainty in the economy.

In the last two years the credit portfolio has been affected by the political crisis that began in 2018 and in 2020 with the health emergency. Official data indicates that at the beginning of 2018 the portfolio in default was barely 1% and in July of this year the proportion rose to 3.7%.

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More on this topic

Loan Portfolio: Growth Slows Down

October 2020

In June 2020, in the context of confinement and the economic crisis, bank credit to the private sector reported an 8% year-on-year increase, but as of July growth began to slow and in September the increase was 5.7%.

According to figures from the Bank of Guatemala, total credit to the private sector began 2020 with a 5.7% year-on-year increase.

Credit Does Not Rebound, Even With Lower Rates

November 2019

Although The Central Bank has been reducing the monetary policy rate to boost the issuance of bank credit, the speed with which the portfolio of loans in national currency grows continues to decrease.

Official data from the country's financial system indicate that by October 2017 the portfolio of loans in local currency grew to 14%, in the same month of 2018 the rate fell to 6% and by the tenth month of 2019 the increase was just 4%.

Banks: Liquidity Surplus in Nicaragua

June 2019

Because of decreasing demand for credit since April last year, banks in the Nicaraguan plaza are filling up with money they can not place in the market.

According to estimates by the Nicaraguan Foundation for Economic and Social Development (Funides) based on official figures, so far this crisis has boosted the liquidity of banks, increasing the proportion of available money that financial institutions have with respect to their obligations to the public, going from 31.76% reported in March 2018 to 46.73% recorded in May this year.

Bank Credit Slows down

May 2019

In recent months, the credit portfolio of public and private banks in Costa Rica has been growing at a slower rate, partly because of high levels of indebtedness of the population.

According to figures from the Central Bank of Costa Rica, between October 2018 and March 2019 the year-on-year growth of credit has generally slowed, since the increase in the portfolio of private banks fell from 14% to 12%, in public banks the decline was from 1.37% to 0.75%, and in the case of other financial intermediaries the decline was from 8.86% to 6.97%.

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