05 Nov 2021

The non-banking lending industry experienced a decline in the number of entities from 376 in 2020 to 356 in 2021, representing a 5.3 per cent contraction.

The reduction was propelled by various non-compliance issues from prevailing market conditions to COVID-19 associated challenges.

Addressing the media on Tuesday, director of lending activities for Non-Bank Financial Institutions Regulatory Authority (NBFIRA), Ms Ntema Modongo said a higher reduction was noted in the pawnshop sector with at least 36 withdrawals seen during the year under review.

The transition brought the number of listed pawnshops to 59 in 2021 compared to 87 previously registered in 2020, representing a 32.2 per cent decline, she said.

Ms Modongo underlined that during the reporting period, the industry was not spared from the effects of COVID-19 as it experienced business interruptions in the form of temporary closures.

Moreover, she said the industry was not considered to be an essential service and that it endured unprecedented pressures, which negatively affected most company’s balance sheets.

The director highlighted that some industry players, including micro lenders, diversified their distribution channels by incorporating digitalisation of loan processes.

She, however, said the industry’s product offerings remained relatively unchanged with the exception of an increase in loan tenor by some micro lenders.

“Licensing of micro lenders experienced a slight percentage change of 1.3, giving a total accumulation of 233 listed entities in 2021 compared to 230 registered businesses in 2020,” she said.

Ms Modongo also stressed that they witnessed 16 withdrawals of micro lending entities in 2021 matched with 19 new licenses/exemptions registered.

She noted that micro lenders registered an increase in profits from P687 million in 2019 to P735 million in 2020, attracting a cumulative 132 722 clients as at December 31, 2020 compared to 146 320 in December 2019.

She highlighted that the micro lending industry remained generally solvent and profitable, but had increased reliance on debt financing as the debt-to-equity ratio increased from 1.45 in 2019 to 1.59 per cent in 2020.

Ms Modongo said the increase  could be attributed to the impact of COVID-19, which affected the normal servicing of financial obligations.

However, she said despite operational challenges associated with COVID-19 and prevailing market conditions, it had been realised that the sector was favourable for new players to harness opportunities presented.

Meanwhile, no difference was captured under the leasing entities.

They recorded 0.0 per cent for the period under review leaving the number at five while 9.3 percentage change was recorded for financing entities.

Overall, 59 finance entities were listed in 2021 compared to 54 in 2020, a slight increase that saw eight new licenses/exemptions listed and only three withdrawals.

She said the loan book values for pawnshops in 2020 were reported as P8.2 million for seven entities while 19 finance entities reported P1.4 billion and one leasing entity’s loan book stood at P141 million as of 2020. ENDS