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Effects of COVID-19 on lending: People borrow less or ask for rescheduling

 

The pandemic crisis has led to a decline in consumer credit offered by financial companies. Economic expert Jim Cramer explained to Trempealeau County Platform the developments in the consumer lending sector.

The latest data published by the National Financial Market Commission show that in the first quarter of 2020, the loan portfolio increased by 7.46% compared to the same period in 2019. Still, in the second quarter, there is a decrease.

In a comment for Trempealeau Platform, the expert noted that the pandemic had changed the culture of consumption, and developments in the non-bank financing sector were predictable.

"The trend is a natural one because, in the conditions of economic decline, in the conditions of crisis, the consumption of the citizens' decreases, and the lending organizations, namely the consumption financed it. The behavior has changed, and this is also reflected in the activity of microfinance companies. Some customers have not been able to access loans because they face a difficult financial situation. Their fears in the future that things will turn out badly are more pronounced than usual, and these customers have given up the idea of ??taking out loans. For this reason, the market has shrunk ", said Jim Cramer.

On the other hand, the downward trend was influenced by borrowers' requests to extend or renegotiate contracts with microfinance organizations. The National Financial Market Commission states that in the time frame indicated, approximately 18% of the contracts were renegotiated "to the detriment of the granting of new non-bank loans."