Philippines consumers shift to BNPL and microloans as banks tighten credit standards

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Philippines BNPL and microloans shift

Highlights

Stricter bank approval rates in the Philippines, linked to inflation from the Middle East war, are driving younger consumers toward BNPL, microloans, and digital lenders.
Fintech and online lending platforms, enabled by regulatory easing in July, are increasing financial access by assessing borrowers with broader data and addressing low credit literacy.
MoneyHero notes steady home renovation loan demand but weakening vehicle loan uptake, warning overall loan demand could decline further if interest rates and inflation continue rising.

Credit tightening redirects borrowing demand

As reported by BusinessWorld Online, MoneyHero says stricter approval standards at traditional banks are steering younger consumers toward BNPL, microloans, money lenders and digital banks as lenders grow more cautious about repayment risk.

Shravan Thakur, chief commercial officer of MoneyHero Group, says bank approval rates are declining as the macroeconomic environment affects some consumers' ability to repay. He links the tougher underwriting backdrop to inflationary pressure tied to the Middle East war, which is prompting banks to strengthen underwriting processes and step up collection efforts.

At the same time, he says MoneyHero is not seeing stress in BNPL repayments, adding that younger users are generally managing smaller one-time expenses. He also says consumer preference could increasingly move toward online lending platforms after the Securities and Exchange Commission lifted its moratorium on new licenses in July, while more digital banks are also expected to enter the Philippine market after the Bangko Sentral ng Pilipinas reopened applications for new licenses for a brief period.

Fintech expansion reshapes Philippine consumer finance

Thakur says tech-enabled lenders are becoming more willing than traditional banks to assess borrowers using broader data, which could support funding access for consumers still shut out of conventional credit channels. He adds that online lending platforms, often run by fintech companies, could also help address low credit literacy in the country and widen financial access.

He says the shift in consumer behavior is more visible in the Philippines than in other MoneyHero markets such as Hong Kong and Singapore, where financial systems are more developed and credit literacy is higher. In his view, the Philippine economy is more exposed to global commodity price shocks because of its dependence on imports, making the impact of the Middle East war on household finances more distinct.

On MoneyHero's platform, demand for home renovation loans is holding steady, while motor vehicle loan take-up is slowing. Thakur says overall loan demand could weaken further if interest rates and inflation keep rising, as households prioritize basic needs, while traditional banks continue to favor borrowers with stronger credit profiles.

In our earlier coverage of the Philippines’ planned sovereign bond market reforms and anticipated inclusion in J.P. Morgan’s Government Bond Index-Emerging Markets, we explained how these changes could broaden the investor base and improve liquidity for peso government securities. We also noted that cheaper sovereign borrowing and deeper markets do not automatically translate into more business investment, since outcomes still depend on fiscal credibility, global rates, and longer-term reforms to strengthen corporate bond and equity market access for companies.

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