Credit has become an increasingly prevalent financial tool, facilitating access to funds for various purposes such as education, housing, and entrepreneurship. However, the attitudes and perceptions of Filipinos toward credit are influenced by a complex interplay of cultural, economic, and social factors.
Historically, Filipinos have had a cautious approach to credit, often preferring to save up for major expenses rather than taking on debt. This mindset can be attributed to a cultural aversion to owing money and a deep-seated value on financial independence and self-reliance.
Additionally, the high levels of poverty and income inequality have contributed to a general wariness of debt, as many individuals have experienced or witnessed the negative consequences of borrowing beyond their means.
Credit perceptions improve
Despite these traditional attitudes, the country’s credit landscape has evolved rapidly in recent years.
In a recent study by TransUnion, it was found that there has been an increase in Filipinos’ credit perception index, indicating a better understanding of concepts, improved product knowledge, increased trust, and greater favorability towards credit products among Filipinos.
![TransUnion_CPI 2024.jpg](https://images.mb.com.ph/production/Trans_Union_CPI_2024_87dd3029e0.jpg)
The TransUnion Credit Perception Index (CPI) for the Philippines currently stands at 69 – an increase of four points from last year.
This year’s study finds that most Filipinos (70 percent) generally understand the concept of credit. Across credit products, Filipinos are most knowledgeable in installment payments (82 percent), followed by credit cards (76 percent), and buy now pay later (BNPL) services (74 percent).
A five percentage point increase in knowledge is observed in both credit cards and BNPL.
These two products also recorded a jump of six and three percentage points from last year in terms of trustworthiness – standing at 76 percent and 74 percent, respectively, after only installment payments (80 percent). Moreover, BNPL (74 percent) and credit cards (72 percent) are growing in favor among the general population too, rising five and nine percentage points from 2023.
Despite these improvements, knowledge gaps still exist between the unbanked population and other populations. Currently, only 54 percent of unbanked Filipinos are knowledgeable about credit – a 16 percentage point deficit compared to the general population, and a 29 percentage point gap versus professionals from the financial technology (FinTech) sector. This represents a widening of the knowledge divide, as the disparity between the general and unbanked populations was at a smaller 11 percentage points last year.
Increasing adoption of credit products
Financial sentiment among Filipinos is less optimistic this year. Close to two fifths (38 percent) of the general population estimate their total wealth to be at P250,000 and below. Moreover, the majority (75 percent) of surveyed Filipinos also consider themselves to be at best lower middle class or below.
Fewer Filipinos are optimistic that their financial situations will improve in the next year (84 percent) – dropping six percentage points from 2023. The study also reflects decreases in the number of Filipinos who expect their household income to increase next year (74 percent) and among those who can easily afford their daily necessities (68 percent), representing declines of nine and four percentage points, respectively.
Unbanked Filipinos are struggling the most with the current situation. Almost three quarters (71 percent) often find themselves with limited money at the end of the month – a stark contrast to findings from both the general population (62 percent) and those in the FinTech sector (46 percent).
Despite these uncertainties, there is a noticeable shift towards diversifying financial tools with significant increases in owning credit-based products and bank accounts. Both credit cards (40 percent) and personal loans (25 percent) show increases of 15 and four percentage points from last year, while debit cards (52 percent), savings accounts (75 percent), and virtual bank accounts (29 percent) reflect increases of 12, 11, and nine percentage points, respectively. The majority of Filipinos (70 percent) also expressed a willingness to explore the usage of digital products and FinTech services in the next 12 months.
Weihan Sun, TransUnion principal of Research and Consulting for Asia Pacific said the improved 2024 CPI score of the Filipino population is a product of collective efforts to foster greater financial literacy and inclusion.
Despite financial uncertainties, Sun said they are delighted to see Filipinos proactively seeking ways to better manage their finances and unlock economic opportunities through responsible credit use,” Sun said
“However, disparities in credit knowledge still exist. Continued efforts are needed to further expand access and services to unbanked Filipinos, enabling them to realize the benefits of being financially included,” Sun said.