Businesses and households are borrowing money from financial institutions in a way they have not done since 2013.

New credit to these customers increased by approximately $469 million last year, Central Bank of Barbados and Financial Services Commission data confirms, as overall loans outstanding to the non-financial private sector, which includes families and companies, climbed to an overall $9.42 billion at the end of 2025.

All of this occurred as Barbadians also repaid their loans, driving down non-performing loans to levels not recorded since June 2009, while people continued to save money.

Central Bank Governor Dr The Most Honourable Kevin Greenidge addressed these issues during his January 28 review of the economy’s 2025 performance.

“The credit also into the non-financial private sector expanded by 5.2 per cent, this is the fastest pace expansion we’ve had since 2013 and that reflects both strong demand by household and businesses,” he reported.

“On the household sector, they borrowed an additional $231.9 million, a 3.6 per cent increase, and that is really in the area of mortgages and consumer lending.

“On the business side, collectively businesses borrowed about $236 million, about a 9.2 per cent increase, and that is really in the hotel and food sector, in real estate and professional service and also in manufacturing.”

The Central Bank boss noted, in the financial sector developments section of the economic review, that “credit expansion covered both households and major industries and reflected a combination of favourable macroeconomic conditions, credit promotions, and sustained willingness by banks to lend”.

Survey findings

This information is based on the findings of the Quarterly Survey of Banks’ Lending Conditions which is issued to the six commercial banks.

The report’s overall assessment was that “financial sector conditions remained sound in 2025 as credit expanded, asset quality improved, and institutions maintained strong buffers”.

“Deposit-taking institutions recorded solid growth in private sector lending with continued improvements in credit quality. Liquidity eased as lending expanded, but ratios remained elevated, while profitability held broadly steady and capital buffers remained well above regulatory requirements,” Greenidge stated.

The economic review shared by the Governor also showed that credit quality “improved further at banks and finance companies in 2025, driven mainly by stronger household repayment”.

“Non-performing loan ratios declined by 0.5 percentage points for banks and by 2.7 percentage points for finance companies,” he said.

“By December 2025, banks and finance companies collectively reduced total stocks of non-performing loans by 9.8 per cent, improving on the 8.6 per cent reduction recorded in the previous year. More than 90 per cent of the decline in impaired loans came from the household sector.”

In addition, deposit growth continued, led by foreign currency balances, while domestic currency deposits increased at a slower pace.

“By December 2025, foreign currency deposits grew by 12.2 per cent, particularly in the real estate and other professional services and construction sectors,” Greenidge said. “Domestic currency deposits increased by 1.8 per cent, with lower balances held by public financial institutions, real estate and other professional services, and wholesale and retail trade contributing to the slower growth.”

The Central Bank’s numbers show that total deposits were $16.2 billion at the end of last year, up from $15.8 billion at the conclusion of 2024.

Domestic currency deposits were $14.79 billion at the end of December, up from $14.53 billion at the end of the same period in 2024.

Foreign currency deposits at year-end were $1.42 billion, up from $1.27 billion at the end of December 2024.

Greenidge also said that “despite the increased lending, financial system liquidity indicators remained elevated”.

“The total excess domestic cash ratio fell from 20.7 per cent to 19.1 per cent, consistent with the overall easing in system liquidity. However, both banks and finance companies maintained ample liquid assets,” he said in the economic review.

“The liquid asset ratio increased by 0.2 percentage points to 28.9 per cent for banks, while the ratio for finance companies declined by one percentage point to 13.5 per cent due to faster asset growth.”

Financial institutions also remained well capitalised.

“Capital buffers remained well above regulatory benchmarks and profitability held broadly steady. Banks and finance companies recorded capital adequacy ratios of 19.4 per cent and 19.7 per cent, respectively,” Greenidge said.

“Higher operational expenses partly offset gains in net interest income and other non-interest income, leaving overall profitability broadly unchanged.” (SC)