11 May, 2020
LatAm Lending fintechs: NPL rates surge amid COVID-19

COVID-19 is hurting LatAm fintech lenders’ non-performing loan rates, as well as other metrics, according to new iupana study

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By Fabiola Seminario

 

The coronavirus pandemic is causing widespread implications across the economy. For fintechs that grant loans, the pandemic is pushing up non-performing loan rates, among a number of impacts on their businesses.

iupana surveyed Latin American lending fintechs in April about the subject, asking them about their strategies to face the crisis, how loans were performing compared with a year ago, and their current lending conditions, among other points.

The survey indicates that the crisis is pummeling their portfolios of existing credits.

Among the surveyed fintechs that lend to individuals, the proportion of the portfolio overdue by more than three months has nearly doubled. The figure rose from an average of 4% a year ago, to 7% today. These lenders say they expect the bad loan ratio to get even worse in the following months.

At the same time, fintechs that lend to SMEs and other businesses reported a three-month NPL rate of 1% a year ago. Today, they forecast that that could rise to 5% by the middle of the year.

 

Fintechs’ COVID strategy

Lending fintechs are also employing much more caution in their new disbursements, the survey showed.

Asked about the strategies their are using to mitigate the impact of the crisis, most said they had tightened their lending criteria. Extending loan tenors, to give clients more time to repay borrowing, was another common strategy. Freezing the accumulation of interest charges was a less-used measure.

When it comes to financing their own portfolios, a quarter of respondents said they saw little change. However, 60% reported there was less financing available for their portfolios.

The full report examines demand for new loans, loan acceptance rates, changes in default rates and interest rates, for fintechs in Latin America.

The full interactive data report can be accessed here. Latin American lending fintechs can access the report for FREE, in exchange for participating in our survey, here.

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