The Struggle of Colombians: The High Cost of Living and Growing Debt Burdens

He high cost of living, high interest rates and the slower pace of the economy are taking a hard toll on millions of Colombians who are increasingly facing greater difficulty in meeting their financial obligations. Only in the last year ending last August, Bank debts more than 30 days past due increased by approximately 10 billion pesosraising its balance above 33.2 trillion pesos, this is 27.5 percent more than the record for August 2022, as revealed by the Financial Superintendence.

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Without a doubt, inflation still above 10.4 percent, an economy that grows at a rate of 0.3 percent, and an average cost of credit of 23.08 percent annually are leaving few options for a number important of Colombians to comply with their financial obligations, especially those associated with consumer loans and microcredit, whose deterioration is advancing at 46.4 and 32.3 percent in real terms annually, respectively.

In consumer debt alone, which includes credit cards, people are stuck paying nearly 16.2 trillion pesos. In the last year, this red balance has risen by more than 6.2 trillion pesos, that is, about 520,000 million that have not been paid per month on average in that period.

The second portfolio with the highest overdue obligations is the commercial one, whose jump in arrears was close to 12.5 trillion pesos at the end of last August2.7 billion more than a year ago, which represents an annual growth of 15 percent real annually.

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Microcredit, which is the second fastest growing portfolio (32.3 percent annually), barely has a balance in arrears of 1.35 billion pesos, while the housing portfolio has arrears of 3.2 billion, which they grow 3.4 percent.

And although the portfolio quality indicator is still at manageable levels, as warned by the market authority itself, It is striking that it has increased in recent months and today is around 5 percent, compared to 3.6 percent last year.

Brake on new loans

For some analysts, it is still striking that the bank’s past due portfolio went from having a negative dynamic last year to significant growth this year, which undoubtedly reflects a good part of the economic situation the country is going through. .

Indeed, At the end of August 2022, the past due portfolio of Colombian banks was reduced by 1.3 trillion pesos, which meant a drop of 14.5 percent annually. However, what has been observed in the last 12 months is what raises concern among the same bankers who notice how every day the delinquency of the portfolio in general grows very quickly (9.8 trillion pesos), despite the aid strategies implemented to prevent this from happening.

The above occurs in a context in which, in addition, the total growth of the banking portfolio, that is, new loans, stagnates again. At the end of the eighth month of 2023, said portfolio registered a negative real annual growth of 4.4 percent, as reported by the Superfinanciera. A year ago, the dynamic was positive and marked around 5.4 percent in real terms annually.

Greater provisions

In its most recent report, the Superfinanciera highlights that although the total portfolio is not growing and delinquencies are skyrocketing, entities are making greater provisions to cover these loans in case they cannot be recovered.

Until last August, the balance of provisions was 42.7 billion pesos, 1.65 percent more than the record from a year ago, which allows a coverage level of 128.5 percent of those loans in arrears.

Seen another way, That means that for every 100 pesos in arrears in the bank portfolio, the entities have 128.5 pesos provisioned to cover those resources in case they cannot recover them.. In the commercial portfolio this coverage reaches 139.7 percent, in the consumer portfolio 124.1 percent, while in the housing and microcredit portfolio it is 113.3 and 88.5 percent, respectively.