Fiji’s total household sector debt reached $2.9 billion as of June 30 this year, reflecting a 10.9 percent increase from the $2.6 billion recorded during the same period last year. This debt represents 29.6 percent of the total loans within the country’s banking industry.
The Reserve Bank of Fiji (RBF) revealed in its October Financial Stability Review that household debt mainly consists of housing loans, accounting for 79 percent of the total, followed by personal loans at 14 percent and transportation loans at 7 percent.
The report indicated that commercial banks continue to dominate lending, providing 87.6 percent of the loans, while the remainder is distributed among licensed credit institutions, including the Housing Authority and Fiji Development Bank (FDB).
According to the June 2024 Credit Conditions Survey (CCS), the rising household loan demand in the first half of this year can be attributed to a revival in consumer confidence and a rise in non-housing related spending.
Households reported a negative credit gap of 10.3 percent as of June 30 this year, which suggests that the accumulation of household credit is currently not a concern. The RBF noted that the ongoing low-interest rate environment is helping to mitigate debt servicing costs, encouraging households to take on larger loans, particularly mortgages.
Furthermore, the non-performing loans (NPL) ratio for the household sector has seen improvement, decreasing to 3.8 percent from 5.1 percent in the same period last year. This ratio is still largely influenced by housing loans, followed by personal and transportation loans.
The RBF anticipates that the household sector’s access to financing will improve in the coming months due to an increase in the national minimum wage rate and civil service pay rises announced in the FY2024-2025 national budget. However, licensed credit providers are advised to conduct thorough due diligence on borrowers to avoid potential issues with debt serviceability and delinquency in the medium term.
The report also highlighted that credit standards for housing loan applications have continued to ease throughout the year, with expectations that this trend will persist until the end of the year.