For most Bahamians, the biggest banking trend for 2023 will be a “credit reset”, as the economy continues to see a rebound, the credit bureau becomes more aware of Bahamians’ credit reality, and more persons look at how they can restructure to get to a more sustainable credit footing, Chief Executive Officer of Fidelity Bank Gowon Bowe said yesterday.
In the US, rising interest rates are squeezing the pockets of American borrowers, but The Bahamas has a different lending environment, Bowe noted, one that remains constant while consumers often have to shift their habits. The habits that Bahamians should adopt, according to Bowe, should involve credit sustainability.
“Our biggest trend is really going to be a credit reset, with the credit bureau now becoming more aware of our credit reality and more persons looking at how they restructure to get to a more sustainable credit footing. Part of that also gives some headroom in order to make more significant purchases like homes and investments,” he said.
“So I think 2023 is largely a reset year, because in 2021 we were still semi-COVID and 2022 was the emergence of the travel rebound in tourism. I think 2023 is trying to achieve normalcy to pre-COVID levels and a peak economic environment. But COVID has taught us that we are not in the most ready state to take on something similar to COVID again.”
Near the end of 2022, mortgages had moderated by $3.9 million, according to The Central Bank of The Bahamas, with private sector credit down by $9.3 million and consumer credit up slightly by $0.6 million.
“Persons are in challenging borrowing circumstances because of their historical credit practices,” Bowe said.
“So even though interest rates are not increasing to use up that headroom like you see in North America, the reality you see is that a lot of persons already found themselves maximized on unproductive credit in terms of unsecured credit that may have been borrowed for things that did not have long-term beneficial use. So borrowing for Christmas spending and vacations, and basically consumer spending. That is what is basically crowding out the ability for persons to find appropriate borrowing in the mortgage market in The Bahamas’ context. So the trend for 2023 is really if we continue to see an economic rebound which is being threatened by the impending recession in the US.”