“YOUR credit is good, but we need cash.” Signs like this posted on establishments abet the low trust levels Filipinos have toward credit products, revealed a private credit information bureau in the Philippines.
In its inaugural Credit Perception Index (CPI), TransUnion Information Solutions Inc. said the Filipinos notion of credit remains “negative” as they associate it with “debt, overspending and irresponsibility.”
The study, which surveyed 1,500 Filipinos nationwide, revealed that respondents believe that people who have credit products tend to overspend and are already in debt.
The study added that respondents also believed that credit borrowers “will eventually acquire unmanageable amounts of debt” and “will go to jail if they do not pay their debts.”
The firm pointed out that these perceptions could be caused by the Filipinos’ sources of credit knowledge and information, which includes social media.
“Filipinos’ long-standing stigmas and perceptions of credit may be due in part to the sources of their credit knowledge,” read the company’s statement released last Wednesday.
The study showed that unbanked Filipinos learn about credit products primarily from their family and friends, followed by Facebook and YouTube.
In contrast, banked Filipinos get their credit knowledge and information from banks and financial institutions, financial advisors, as well as their family and friends.
TransUnion President and CEO Maria Gracia Pia Arellano explained that there is a “strong correlation” between the Filipinos’ knowledge about credit products and their trust toward such.
“The more they know about a certain product, the more they trust it and are inclined in buying it,” Arellano said during a press briefing.
Nonetheless, she emphasized that it doesn’t mean that the information that unbanked Filipinos get from their go-to channel of social media about credit products is unreliable.
Arellano pointed out that the study just shows that social media is a channel that banks should take advantage of in educating Filipinos about various credit products and drive them toward “positive” perception about credit.
“There is an enormous opportunity for the public and private sectors to work together to provide more formal and reliable channels for the Filipino public to acquire financial knowledge and thus transform the conversations of credit seen as mere harm into a gateway to improved economic opportunities,” Arellano said.
“It is not simply about understanding personal finances and credit, but more importantly, leveraging the power to access opportunities made possible by more informed financial decisions and responsible lending,” she added.
The TransUnion study revealed that the CPI of the Philippines currently stands at 65 with the unbanked population having a CPI of 53.
Arellano said the study also considered the Filipinos’ current attitudes, knowledge, trust, favorability and future receptivity regarding credit products.
The study showed that the majority of Filipinos (69 percent) have a general understanding of the concept of credit. Likewise, Filipinos expressed trustworthiness in various credit products such as credit card installment payments and personal loans.
“This suggests a likely correlation between knowledge and trust – the more knowledgeable a consumer is about a credit product, the more trustworthy the consumer would find the product,” the credit information business said.