Increased Demand for Credit Among Both Households and Businesses

The findings of the first quarterly Survey of Bank Lending Conditions (SBLC), which the Central Bank of Barbados administered to the island’s six commercial banks, reveal a modest increase in households and businesses’ demand for credit as well as in commercial banks’ willingness to lend. The survey captured commercial banks’ activities for the period October to December 2024.

Demand for Credit

According to the survey, while the majority of requests for credit were for consumer loans, which include loans for vehicles, educational purposes, and travel, applications for residential mortgages and business loans were the largest in terms of value. Commercial banks approved 75 percent of all applications, with loan denials being mainly due to either the creditworthiness of borrowers or collateral challenges for businesses.

Drivers of Increased Demand

The survey found that, for households, the improvement in macroeconomic conditions combined with modestly lower lending rates banks offered during seasonal campaigns positively influenced the decision to pursue residential mortgages and consumer loans. 

For businesses, the demand for commercial mortgages was stable relative to the previous quarter, while there was a modest uptick in applications to meet financing needs related to business expansion, working capital, and debt refinancing. These developments suggest positive business confidence and signal potential increased private sector investment and broader economic activity in the near-term. 

Willingness to Lend

Banks’ openness to lending was largely unchanged relative to the previous quarter. However, some banks reported higher maximum loan amounts and lower lending rates, supported by a stronger capital base and seasonal credit campaigns. A combination of institution-specific factors (risk appetite and capital buffers of banks), credit worthiness of borrowers, macroeconomic conditions and competitive pressure, positively influenced lending decisions. On the other hand, borrower indebtedness had a negative impact. 

Outlook

Bankers expect credit demand to grow modestly over the near-term, with stronger expectations for residential mortgages. The survey found that while most banks plan to maintain their lending posture, a greater proportion expect that the prospects for lending to the business and residential mortgage category will increase modestly in the near-term. This would bode well for home ownership and business activity should lending conditions become even more favourable. 

The Central Bank will conduct the survey quarterly to continuously assess both the demand for credit and commercial banks’ willingness to lend.