53.9% of Dominican banks’ loans

Micro, small and medium-sized enterprises (MSMEs) in the Dominican Republic dominate the business landscape, representing almost 98% of the local business fabric. Their influence on the country’s economic development is undeniable, as they contribute 39.6% of the gross domestic product (GDP). This progress also has to do with the credit facilities provided by banks to these businesses.

The most recent statistics from the Superintendency of Banks (SB) highlight an 11.3% increase in the credit portfolio of the commerce sector up to May 2023, going from DR$823,295 million to DR$917,124 million. This translates into an increase of DR$93,829 million and 41,017 additional credits at a weighted average interest rate of 18%.

As of May of this year, the Dominican financial system registered 5,843,603 loans by type of portfolio, which reached DR$1,703.9 billion. Of this amount, 53.8% corresponds to commercial activities, with 648,340 beneficiaries; followed by 23.3% for consumer loans, which as of May 2023 closed at DR$398,099 million, equivalent to 20.8% more than in May of last year. The beneficiaries of this credit were 2,630,089.

Meanwhile, mortgage loans, with DR$311,619 million, represented the third largest item, for an increase of 15.6% over the same month of 2022. As of May 2023, 129,044 mortgage loans were granted, that is, 10,537 more than in the same month of 2022.

Credit card

Meanwhile, credit card debt amounted to DR$77,058 million, with 129,044 financial instruments granted. This, in turn, represents an increase of DR$15,688 million when compared to the DR$61,370 million granted in May of the previous year.

This increase in this plastic also means that purchasers are increasingly opting for short-term financing, due to the wide acceptance in different commercial establishments, both local and international: online or face-to-face.

Interest rates

The Dominican Central Bank has changed its monetary policy from restrictive to flexible with stimulus including reductions to the monetary policy rate (TPM). In just over a month, this rate has experienced a reduction of 75 basis points, from 8.50% in May to 7.75% per annum in June 2023.

The measure seeks to stimulate consumption and give a boost to the local economy, especially to key sectors such as MSMEs and households.

According to SB data, as of May 2023 the weighted average interest rate for the credit portfolio by type places mortgage loans at 10.7%, while financing for commercial and consumer activities is at 11.3% and 18%, respectively. As for credit cards, it is 58%.

According to experts, it is likely that the monetary agency will continue lowering rates, thus encouraging more credit.

Source: Eldinero.com

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