Consumer Loans are still rising

Money lent to households grew by nearly 20% for the second quarter of the year with more consumers borrowing from banks to buy cars and obtain instant cash, the Bangko Sentral ng Pilipinas (BSP) said. The demand for loans to finance their personal needs continued to expand in the first half of the year and that consumer loans of universal, commercial and thrift banks stood at Php959.2 billion at the end of June this year.

This was a 19.29-percent rise from the Php959.2-billion total consumer loans seen a year earlier. Compared, meanwhile to the previous quarter, the end-June consumer loan figure is 2.8 percent higher than the Php932.8 billion seen in end-March this year.

“This sustains the quarter-on-quarter growth in consumer loans that started in 2008,” the BSP said.

Consumer loans are typically extended to individual clients of banks looking to purchase cars and underwrite home mortgage payments, among other purposes.

“Consumer loans increased quarter-on-quarter in June due to an increase in auto loans, credit card receivables and salary loans,” the BSP said. “Residential estate loans, on the other hand, declined marginally during the period.”

Salary loans, or advance payroll credits taken out by employees, saw an increase of 89.6% to P84.6 billion for the second quarter compared to the Php44.6 billion in the comparable period last year, and up by 11.1% from end-March.

Loans for housing lots, meanwhile, stood at Php409.2 billion for the period, higher by 17.3% from last year’s Php348.7 billion. However, this was lower by 0.6% from the Php411.4 billion recorded in the first quarter.

Car loans also reached Php259.4 billion for the second quarter, higher by 25.3% from the same period last year, and up by 6% from the Php207 billion given out by the banks in from January to March. Debts incurred via credit cards stood at Php166.5 billion, up by 5.9% from June 2014.

Other consumer loans saw a 14.8% decline for the quarter to Php39.6 billion from a year ago.

Despite the increase in consumer credit, banks were also able to trim the share of bad debts to their total loan portfolio while increasing their security cover from credit losses, the BSP said.

Non-performing loans - obligations left unpaid for at least 30 days past due date - stood at 4.5% of the banks’ total consumer loans, lower than the 4.9% in the first quarter. This comes alongside a 61.2% allocation for loan loss reserves on bad debts.

The central bank added that the 16.7% share of consumer loans in the commercial and thrift banks’ total loan portfolio stood the lowest among the ASEAN 5 economies, namely Malaysia’s 57.1%, Indonesia’s 28.3%, Thailand’s 27.9%, and Singapore’s 25.9%.

The BSP monitors the quality of all types of bank loans to ensure a high credit system for financial stability.

Important tips behind saving money

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Personal Finances is not about your money itself but it’s about your behavior towards it. There a tons of reason why people save but the concept of saving is  insanely simple yet not easy to achieve. It will be really hard for someone to save without this big motivation. Imagine yourself waking up feeling lost. A restless wanderer without a purpose. Saving money is like going to the gym knowing you are out of shape, but without the sense of  urgency you won’t even  start doing it. Your why starts with you. No one can push you hard aside from you. I believe that this is the year that you can change your financial life through changing your perspective.

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Clear purpose 

Your why is like the fuel to your car, without it you won’t last. Your aim is to save money for the future endeavor it might be for emergency, business or for a house etc. Try to reflect and ask yourself again and again the reason you need to save some funds. This will not be easy. Again, when you can’t identify your reason that is anchored to your core values it will be harder for you to accomplish goals you have in mind. Successful people know why they’re doing what they’re doing. 

Recommendation: Ask yourself deeply about the purpose of money that you have. Name every single cent, whether it is big or small everything has a purpose. Do this everyday and you will create a powerful habit that will last for a lifetime. Remember when you meet God someday He will ask you “what have you done with the money I gave you?”. 

Luke 16:11 ESV If then you have not been faithful in the unrighteous wealth, who will entrust to you the true riches?

Determination 

This is the backbone of your financial life when everything is falling apart. There will be bumps on  the road. Your dreams will be derail once you don’t have this tenacity inside. After saving for 4 weeks and seeing your savings  account getting bigger you suddenly stop, what a crazy way to loose the momentum you built. After a couple of weeks of  not wasting your money and exercising your patience, you  suddenly cheat yourself with the ultra mega SALE. When your weak will and old habits knocks you down,  try to get back up asap. 

Recommendation:  Learn from you old ways. Create an action plan. Tell yourself that you want to win. You are not average but you are the master of your money and not the other way around.

Proverbs 13:11 ESV Wealth gained hastily will dwindle, but whoever gathers little by little will increase it.

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Commitment 

Decide to be different. When I’m interested with something I go for it but when there are a lot of brick walls in front of me, commitment showing up. Those walls are the symbol of how much you badly need it. It is a matter of life and death. Are you willing to go thru the series of test just to pass that wall or when you face that great wall you just stop and accept it that there’s no way you can go through. Are you willing to act broke so you can be rich?

Recommendation: Do it, desire it everyday. You are committed to win not just today but a lifetime. Consciously fight till the end. 

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2 Timothy 4:7 ESV I have fought the good fight, I have finished the race, I have kept the faith.

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The habit of saving money is like an archery contest, you want to hit the bulls eye every time but it will take a lot of adjustment if you are NOT used to it.

David Isaiah Angway is a Financial Evangelist

Common mistakes of employees during payday



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I am an employee for the last 6 yrs in my life and I notice that these are the bad habits that makes an employee have a weak savings account. Seeing the pattern is like getting out from the rat race.

1.Not paying yourself  first regardless of the SALARY amount.

- Every cut off I made sure that I put money to my savings and mutual funds. Why, because I want to afford the future. Paying myself first will give me a satisfaction. It is hard to build that in the first place specially if you don't have discipline. But knowing that I can help the needy with my extra cash, use the excess funds to support my friends Mission trips abroad in spreading the gospel and lastly afford the future of my daughter will give me a lovely future. The question is can you afford the future?

2.Thinking about what to spend immediately.

- In our culture as Filipino we are so hyped up with the idea of consumerism. All super malls and well known boutiques or brands are here in the Philippines. They know how to feed our eyes! Marketing strategist were able to identify the behavior of every consumers that's why massive sale also happens during the 15th and 30th of every month. You know why? Because they are aware when your money is available. Sad to say we keep on getting to their bait and most of the time we are experiencing the pecha de peligro.

3.Giving TOO MUCH to your parents/relative.

- There's nothing wrong in giving but in reality most of us are in a sandwich generation. The reason behind it were very simple. You have an aging parents but since they don't have sufficient amount of money at their age right now you need to support almost all the things they need now so that they can live while you are starting a family. Leaving you CASHLESS and savings less. Fast forward during your retirement age your kids will also suffer since you weren't able to work on your finances while you are still working. Simple but it makes a lot of sense.

4.Not having a clear goal or visions.

- You are a restless  wanderer if you don't have directions in life. You got goals in your health and your career but you don't have any clear visions what to do with your money? I find that very odd. You need to go back to basics such as asking yourself. When do I want to be a millionaire? Where to invest in stocks?Where to retire at the age of 45? Can I afford the tuition fee of my son/daughter with my current salary now? Developing that kind of system will surely answer your current problem. I recommend you to take time to know where you at now.

5.Don't have a good budget structure.

We normally do mental accounting upon receiving our salary and it is really fascinating  we just spend as much as possible. After 2-3 days some of us already feel that they need to file bankruptcy due to poor spending habits. Once you feel that pain in spending, have you ever tell yourself that
you won't do it again then after the next cut off you see yourself doing the same bad habits? Once you study yourself start making small changes. Soon you will see the difference.

David Isaiah Angway is a Financial Evangelist

Islamic banking introduced

I thought i would write about this topic, because some people do not know what Islamic banking is or haven't even heard of it at all. Education is the key to financial success and knowing about Islamic banking might only help you in your chosen path, that's why this topic must not be omitted. I will not write too in depth about it, but i just thought everyone should know, what Islamic banking really is and what is the difference between Islamic and Conventional banks.

Interest-free banking

Some financial institutions do not charge interest on loans or pay interest on savings, because it is against certain ethical or religious beliefs. For example, in Islamic countries and major financial centres there are Islamic banks banks that offer interest-free banking.
Islamic banks do not pay interest to depositors or charge interest to borrowers. Instead they invest in companies and share the profits with their depositors. Investment financing and trade financing are done on a profit and loss sharing (PLS) basis. Consequently the banks, their depositors, and their borrowers also share the risks of the business. This form of financing is similar to that of venture capitalists or risk capitalists who buy the share of new companies.

Types of accounts

Current accounts in Islamic banks give no return - pay no interest - to depositors. They are a safekeeping arrangement between the depositors and the bank, which allows the depositors to withdraw their money at any time, and permits the bank to use this money. Islamic banks do not usually grant overdrafts on current accounts. Savings accounts can pay a return to depositors, depending on the bank's profitability: that is, its ability to earn a profit. Therefore the amount of return depends on how much profit the bank makes in a given period. However, these payments are not guaranteed. There is no fixed rate of return: the amount of money the investment pays, expressed as a percentage of the amount invested, is not fixed. Banks are careful to invest money from savings accounts in relatively risk free, short-term projects. Investment accounts are fixed-term deposits which cannot be withdrawn before maturity. They receive a share of the bank's profits. In theory, the rate of return could be negative, if the bank makes a loss. In other words, the capital is not guaranteed. However, this rarely happens, especially in well established banks, due to their good management.

Leasing and short-term loans

To finance the purchase of expensive consumer goods for personal consumption, Islamic banks can buy an item for a customer, and the customer repays the bank at a higher price later on. Or the bank can buy an item for a customer with a leasing or hire purchase arrangement. Another possibility is for the bank to lend money without interest but to cover its expenses with a service charge.
If a business suddenly needs very short-term capital or working capital for unexpected purchases and expenses, it can be difficult to get it under the PLS system. On the other hand, PLS means that bank-customer relations are very close, and that banks have to be very careful in evaluating projects, as they are buying shares in the company.

Summary

Conventional banks:

• Pay interest to depositors
• Charge interest to borrowers
• Lend money to finance personal consumption goods

Islamic banks:

• Give no return on current accounts; share profits with holders of savings and investment accounts
• Share borrowers' profits (or losses)
• Buy items for personal consumers with a leasing or hire-purchase arrangement
  

Well, these would be the main differences between conventional and Islamic banks. The question which one is better cannot be answered one sided, as they both have their pros and cons.