Finance companies post strong credit growth on vehicle, gold-backed loans

Finance companies in the island nation recorded a strong credit expansion during the first half of 2025, driven by vehicle and gold-backed lending, following the removal of restrictions on vehicle imports, the Central Bank said.

Finance companies recorded a robust expansion in credit during the first half of 2025, driven by vehicle and gold-backed lending following the removal of restrictions on vehicle imports, the Central Bank said in its Financial Stability Review (FSR) 2025.

The Central Bank noted that the growth in the sector was also supported by rising gold prices and lower market interest rates. As a result, the credit portfolio remained concentrated in a few asset categories, raising collateral risk.

Reflecting the sector’s rapid expansion, the Stage 3 Loans ratio declined considerably by end-June 2025 compared to the same period in 2024. Meanwhile, liquid assets recorded a decline for four consecutive quarters on a year-on-year basis, though they remained above the minimum regulatory requirement.

Profitability of finance companies also improved, underpinned by higher net interest income during the review period. The Capital Adequacy Ratio (CAR) of the sector stayed well above regulatory minimums, with a marginal decline due to an increase in Risk Weighted Assets in line with the credit expansion.

The Central Bank highlighted that these developments reflect the FC sector’s strong credit momentum, particularly in vehicle and gold-backed loans, and its ability to maintain capital and liquidity buffers despite the sector’s concentrated lending profile. (SAA)