Jamaican deposit-taking institutions are taking a more creative approach and have intensified their campaigns to boost the take-up of credit lines as customers take a more cautious approach to borrowing.
In particular, banks and building societies have zoned in on bread-and-butter car loan offers and credit cards which carry the highest interest rate of any product offered and account for a huge chunk of loan portfolios.
Yet, the move from the sector comes at time when the loans market has softened, with the overall growth rate of loans slowing.
Bank of Jamaica’s (BOJ) latest data indicates that for commercial banks, the rate of loan growth in the quarter ended March 31, 2021, declined to a slower 9.1 per cent. This compared to 16.5 per cent growth in the similar quarter for 2020 and 15.6 per cent increase as at March 2019.
Total loans in the March quarter expanded to JM$944.5 billion compared to JM$866 billion as at March 31, 2020.
In total, the stock of private sector loans and advances recorded year-on-year growth of 8.8 per cent as at March 2021, compared to 15.8 per cent a year earlier, according to BOJ data.
At present, car loan marketing appears to be attracting the biggest advertising spend.
In mid-May, Jamaica National Bank invited applications for new car loans, with the offer of paying JM$11,000 monthly for each JM$1 million borrowed.
The company said its new car loan package would benefit borrowers with “affordable monthly payments, up to 100 per cent financing and up to 10 years to repay.”
Moreover, the bank is offering complementary products from its sister companies JN General Insurance (JNGI), Jamaica Automobile Association (JAA) and JN Life.
“One low monthly payment for auto loan and insurance; 25 per cent off your insurance from JN General Insurance (JNGI); document renewal and unlimited roadside assistance from Jamaica Automobile Association (JAA); and creditor life insurance available from JN Life Insurance,” was one such offer.
In addition, the company is also spending big advertising bucks on promoting personal loans for products such as Guardman’s iProtect home security system, which comes with payments as low as JM$3,345 monthly.
Scotiabank Jamaica, meanwhile, is laying cash on the line with its marketing push for car loans.
It has partnered with new car dealers to provide 100 per cent financing at 6.75 per cent per annum for motor vehicles with one year of free insurance coverage, a 50 per cent discount on loan-processing fees, plus a credit card free of fees for one year.
Victoria Mutual Building Society is offering up to 100 per cent financing, “low monthly payments, up to nine years to repay, fast loan processing, no penalty for early repayment, loan decisions within two days, lower interest rate than its competitors, and low processing fees”.
In contrast to commercial banks, other deposit takers have seen year-on-year improvement in loan growth.
For the merchant banking sector which consists of one company, Cornerstone Trust and Merchant Bank, the rate of loan growth in the March quarter of 2021 was 39.6 per cent, up from 38.3 per cent in March 2020 and 19.3 per cent at March 2019. For the building society sector, which includes Victoria Mutual Building Society and Jamaica National Building Society, loans grew 13.3 per cent as at March 2021, up from 7.4 per cent at March 2020 and 10.1 per cent at March 2019.