Redefining borrowing habits of Filipinos

Borrowing in Filipino households often followed a similar script: a neighbor knocking to ask for a small loan, a relative extending help, or a sari-sari store owner keeping a handwritten list of unpaid balances.

The practice of “utang” has long been rooted in trust and survival, and debt has not been treated as a last resort but as part of daily life. When income falls short, borrowing usually fills the gap. Such arrangement has been reinforced across generations, especially as saving is difficult and access to formal credit remains uneven.

Now, this pattern is starting to change for Filipinos.

The Institute of International Finance reported that the debt ratio among Filipino households eased to 11% in the fourth quarter of 2025, from 11.6% a year ago. Lending activity remains steady, according to the Bangko Sentral ng Pilipinas (BSP), with household loans rising from 23.3% to 28.4%.

A fourth-quarter 2025 Consumer Pulse Study by TransUnion also found that borrowing decisions have become more intentional, with consumers showing greater scrutiny before taking on debt. Intent to apply for or refinance credit fell to 47% from 53% a year earlier.

Instead, Filipinos now lean toward specific and controlled credit options. Personal loans accounted for 49% of planned borrowing, while buy now, pay later (BNPL) services made up 35%. These products often come with defined terms and shorter repayment periods, which may help borrowers plan their finances more closely.

The same report noted that 58% of Filipinos still view access to credit as important to achieving financial goals, but this figure marks a slight decline from the previous year. The change points to a change in mindset, with credit remaining relevant, but not as the first solution to financial pressure.

Deep roots of borrowing culture

According to the Financial Executives Institute of the Philippines, borrowing is often normalized in Filipino society, where financial support flows through family and community networks. The concept of “utang na loob,” or a sense of obligation tied to borrowed help, reinforces this system.

Savings also remain limited for many households. According to the BSP, only 25.6% of households reported having savings in 2024, and many continue to spend before setting aside money. In cases of emergencies, borrowing often becomes the immediate response.

Economic conditions play a part, as inequality remains pronounced. The top 1% of earners account for 17% of national income, while the bottom 50% share only 14%. As of 2023, about 17 million Filipinos lived below the poverty line, according to the Philippine Statistics Authority.

Meanwhile, a large gap in understanding interest rates, loan terms and long-term financial planning has contributed to cycles of debt, especially among households with fewer resources.

Confidence rises with caution

The change in borrowing behavior comes as households report stable income conditions alongside persistent cost pressures.

TransUnion noted that 42% of Filipinos reported income growth in the past three months, while 41% said their income remained unchanged. Looking ahead, 75% expect their income to rise within the next year, and 80% express optimism about their household finances.

While many expect income growth, inflation remains the top concern for 81% of Filipinos, followed by job stability at 57% and interest rates at 45%. These issues have stayed consistent since 2024, indicating that households are planning beyond short-term changes.

Meanwhile, 49% of households expect higher bills and loan payments, while 42% reported difficulty paying debts in full. These pressures have led some consumers to rely less on credit for daily needs and more for targeted use.

At the same time, about 47% of households cut back on discretionary spending such as dining out and travel. Half of respondents said they plan to spend less during the holiday season compared with the previous year. Only 27% plan to increase spending on major purchases such as appliances or vehicles.

Despite these adjustments, households are not fully withdrawing from economic activity. Instead, they are redefining spending priorities, focusing on purchases within their budget.

Widening access to credit

The 2024 TransUnion Credit Perception Index placed Gen Z as leaders of credit adoption, with a score of 83 and nearly one-third of new-to-card borrowers coming from the group. Between 2023 and 2025, credit card usage among young adults increased from about 9% to 13.5%, while overall ownership reached more than 15% of Filipino adults.

However, hesitation remains as 69% of Filipinos prefer cash or e-wallets, while 55% say they avoid credit due to concerns about debt and 54% link it to overspending.

Meanwhile, financial technology firms are widening access to credit, particularly for users outside the traditional banking system.

Mobile platforms now offer credit lines, BNPL services, and microloans embedded within digital wallets. Such tools function like traditional credit but require less documentation and offer faster approval through app-based systems.

At the same time, banks are adjusting to technology, with many of them offering app-based applications, instant approvals, and automated credit scoring to attract first-time borrowers.

Hence, digitalization has blurred the line between digital finance and formal lending, and younger users are adopting these services as entry points to credit.

At the policy level, the BSP plans to open external access to its Credit Information Management System this year to consolidates borrower-level data. Under the program, lenders, credit-scoring firms, and borrowers will gain access to verified credit information, subject to data privacy rules.

Borrowers will also be able to review their own records, which could help them build credit histories through consistent repayment. As of mid-2025, more than 16 million borrower profiles are tied to over 65 million contracts.

The BSP also continues the Economic and Financial Learning Program to educate Filipinos on economics and finance. The program aims to promote greater understanding of essential economic concepts and issues among the general public toward economic participation.

In a statement, BSP Governor Eli M. Remolona Jr. called for stronger coordination to widen access to reliable credit and deepen financial inclusion across the country.

“Financial education and consumer protection remain essential ingredients in [financial inclusion]. We must equip every Filipino with the knowledge and confidence to make sound financial decisions and safeguard their financial well-being,” he said. — Mhicole A. Moral