Costa Rica: Crisis Weakens Credit Portfolio

The high levels of unemployment and the poor growth of credit are factors that have worsened in the context of the economic crisis generated by the outbreak of covid-19, which has led to the deterioration of the credit record of customers.

Monday, September 7, 2020

Costa Rica's economic situation worsened in the current economic crisis scenario, a damage that is evidenced by the rise in unemployment, since during the second quarter of 2020 the unemployment rate rose to 24%, a proportion that doubles the 12% reported for the same period in 2019.

After the unemployment rate doubled in the last year, the deterioration of the credit portfolios of the country's financial institutions accelerated.

Data from the General Superintendency of Financial Institutions (Sugef) show that in July 2019, 80% of the loans placed by the financial system were classified as low risk or good portfolio, but in the same month of 2020 this proportion fell by 6% to 74%.

See "Credits: Potential Market in the Region"

The former head of the Sugef, Bernardo Alfaro, told Nacion.com that "... the economic effects of the covid-19 are joined by other reasons that were dragging on before the pandemic, but they deepened even more, such as high unemployment and poor credit growth."

Maurilio Aguilar, Director of Corporate Risk of Banco Popular, explained that "... the impact is generated by the structure of clients of the institution, since it is concentrated in public and private employees, independent workers, and micro, small and medium enterprises."

Reports from CentralAmericaData detail that currently in Central America close to 16 million people are looking to contract financial services through the Internet, of this group of consumers, approximately 11% explore options to acquire a credit card.

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More on this topic

Credits in Nicaragua: Crisis on the Rise

May 2020

Given the political and economic crisis affecting the country since April 2018, a scenario that has combined with the crisis of covid-19, the loan portfolio increased from $5,172 million in March 2018 to $3,404 million at the end of April 2020.

According to figures of the Superintendence of Banks and Other Financial Institutions (Siboif), in the first four months of the year a decrease in the credit portfolio is also reflected, since it went from $3.578 million reported at the closing of 2019 to $3.404 million recorded in April 2020, representing -5% variation for the four-month period in question.

Costa Rica: Agricultural Credit Arrears Increases

May 2019

In the last two years, non-performing loans to the agricultural sector increased from 2.4% to 5.9% between April 2017 and the same month in 2019.

Figures from the General Superintendence of Financial Entities (Sugef) indicate that the increase reported in the arrears of agricultural loans includes operations with delays of more than 90 days, as well as operations that are in judicial collection.

Complicated Economic Scenario

September 2018

The deterioration of the economy and rising unemployment are the main reasons behind the difficulties faced by companies and individuals in Costa Rica in paying back their bank loans.

According to figures from the General Superintendence of Financial Entities, between January 2017 and July 2018, the percentage of loans in defaults for more than 90 days or in judicial collection, went from 1.65% to 2.51%, showing an upward trend in recent months.

Bank Defaults on the Rise

June 2018

From June 2017 to May 2018, the average default rate of the Costa Rican financial system's credit portfolio increased from 1.36% to 2.14%.

According to figures from the General Superintendence of Financial Institutions (Sugef), between April and May of this year, Banco Nacional de Costa Rica (BNCR) saw an increased in its arrears of greater than 90 days and judicial collection from 2.65% to 4.18%, thus surpassing the 3% that is established as the prudent maximum limit.

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