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Panama's growth in personal loans drives higher consumer lending

Personal loans by Panamanian banks, which represent around 65% of total consumer loans, rose 7.1% in August compared to the same period of 2015 as they helped to drive stronger growth in consumer lending, Capital Financiero reported, citing data from the banking regulator, Superintendencia de Bancos de Panamá.

Consumer loans, which includes credit card and car loans, rose 9.8% overall in August from a year earlier.

Banking industry sources reportedly said that higher lending in this segment is mainly due to the need of consumers to improve their quality of life, housing and education, as well as to finance other basic needs.

However, although this type of lending is positive for the economy, it is also vulnerable to changes in the market given that consumers tend to prioritize mortgages and utility bills over personal loans, credit cards or car payments, the report said, citing economist Adolfo Quintero.

Even so, despite higher delinquency levels, banks' portfolios are covered by provisions and loan guarantees, the banking regulator reportedly said in September. And, going forward, greater internal demand could benefit delinquency rates if it translates into job creation and higher incomes, the regulator noted.