Fiji’s total household debt reached $2.9 billion as of June 30 this year, representing a 10.9 percent increase from the $2.6 billion recorded during the same time last year. This debt accounted for 29.6 percent of the total loans within the country’s banking industry.
According to the Reserve Bank of Fiji’s (RBF) October Financial Stability Review, household debt is primarily made up of housing loans at 79 percent, personal loans at 14 percent, and transportation loans at 7 percent. The review noted that commercial banks facilitated the majority of lending, making up 87.6 percent, while the remaining portion was distributed among licensed credit institutions (LCIs) such as the Housing Authority and the Fiji Development Bank (FDB).
The report referenced the June 2024 Credit Conditions Survey (CCS), which indicated that the rise in household loan demand during the first half of the year was largely driven by renewed consumer confidence and an increase in non-housing related spending. Households also reported a negative credit gap of 10.3 percent as of June 30 this year, suggesting that the increase in credit within households does not pose a concern at this time.
The RBF pointed out that the current low-interest rate environment continues to help reduce debt servicing costs and encourages households to take out larger loans, particularly mortgages. Additionally, the non-performing loans (NPL) ratio for the household sector improved, standing at 3.8 percent compared to 5.1 percent for the same period in 2023. The NPLs are primarily linked to housing loans, followed by personal and transportation loans.
Looking ahead, the household sector’s ability to access finance is expected to improve in the coming months, fueled by the increase in the national minimum wage and civil service salary raises outlined in the FY2024-2025 national budget. However, the RBF stressed that licensed credit providers must exercise due diligence on borrowers to avoid issues with debt serviceability and potential delinquency in the medium term.
The report also mentioned that credit standards for housing loan applications have been continuing to ease during the year leading up to June 2024, and respondents expect this trend to persist through the end of the year.