According to a report on credit card borrowing across the region by Singapore-based fintech firm Roshi Pte Ltd., credit card debt in the Philippines is at a “critical” risk level as the typical borrower owes more than four times their monthly income.
The firm found that Singaporeans had the highest monthly income in Southeast Asia at approximately P273,000, which partially explains its high average credit card debt at P236,000. That amount represents a manageable percentage of the monthly income of many cardholders.
“Unlike regional neighbors, Singapore’s debt levels are supported by strong income capacity and advanced financial infrastructure, positioning cardholders to manage obligations effectively,” Roshi said.
However, in the case of cardholders in the Philippines, income doesn’t correlate directly with credit card debt, as the average was pegged at about P92,800, which is way beyond the average monthly income of about P21,900.
Such an amount of credit card debt was recorded despite low overall household leverage in the Philippines, where borrowings represent only 11.7 percent of gross domestic product.
It shows “a specific preference for card-based borrowing among those with access to formal financial services,” Roshi said.
It added that the 425 percent debt-to-income ratio in the Philippines is the worst in the region and indicates a “severe financial stress” as it “far exceeds regional norms and suggests potential financial vulnerability among Filipino cardholders.”
The findings of Roshi are symptoms of a complex problem in the Philippines, where a low average income is coupled with the lack of financial literacy and a tendency to turn to quick fixes like credit card debt or gambling. Correcting the trend will require more than just wage hikes and controlling inflation, as educating the populace on the difference between good debt and bad debt will also be crucial, especially as the financial infrastructure makes consumer loans more accessible.
The government and the financial services sector, along with civil society and advocacy groups, have a lot of work ahead of them when it comes to preventing Filipinos from being brought to financial ruin by easily accessible consumer debts.*
