FILIPINOS’ borrowings are growing faster than their earnings, with regulators warning that the “imbalance” could erode households’ resilience to economic shocks and potentially create strains that may spill over into the banking system.
In its 2025 report released on June 8, the Financial Stability Coordination Council (FSCC) said retail loans expanded at an average annual rate of 15.7 percent between 2021 and 2025, with unsecured credit—driven largely by credit card borrowing and salary loans—surging 27.7 percent.
Over the same period, household earnings that fuel consumption grew by just 5.8 percent.
The council noted that unsecured consumer debt has climbed to record levels and is growing faster than the broader economy, although household indebtedness in the Philippines remains below that of many of its Southeast Asian peers.
Credit card receivables accounted for the second-largest share of consumer loans at 30.9 percent, behind housing loans, and recorded the fastest growth in the segment over the past six years, the report noted.
The rise in unsecured borrowing partly reflects demographic trends, including a growing young workforce, according to the council, which also cited genuine financial inclusion gains as increased adoption of cashless payments helped ease access to credit products.
But it also points to banks’ increasing focus on higher-yield consumer lending products as they sought to protect margins in a low-interest-rate environment.
Overall, the FSCC — composed of the Bangko Sentral ng Pilipinas, Department of Finance, Insurance Commission, Philippine Deposit Insurance Corp. and Securities and Exchange Commission — said such a trend also introduces new debt-servicing vulnerabilities that require monitoring.
The latest BSP data showed outstanding consumer loans at large banks climbed 19.6 percent from a year earlier to nearly P2 trillion in April. Consumer credit accounted for 13.5 percent of total bank lending, up from 9.1 percent in December 2019, before the pandemic.
The warning comes as policymakers grapple with the economic fallout from the war in the Middle East.
Ratings agency Moody’s has cautioned that a prolonged conflict could pressure Philippine banks if higher oil prices fuel inflation, force further monetary tightening and weaken borrowers’ ability to keep up with debt payments.
Looking ahead, the FSCC said risks from the expansion of unsecured consumer credit were mitigated by banks’ adherence to credit risk management and ongoing supervisory oversight.
For now, the council said most retail borrowers continue to meet their payment obligations. (Ian Nicolas P. Cigaral © Philippine Daily Inquirer)
