Credit cards are becoming gradually useless in Venezuela due to high inflation and government restrictions, hurting people already grappling to meet daily needs on small salaries, analysts, banking industry sources, and consumers said.
The country’s government imposed tough lending rules during Venezuela’s economic collapse – authorizing banks to lend a maximum of 27% of their cash flow – sending local business owners abroad to apply for loans.
And though the government of President Nicolas Maduro eased currency restrictions in 2019 and allowed local banks open dollar-denominated accounts, most credit restrictions remain.
“They are useless,” administrator Lina Pereira, from the central city of Valencia, said of her two credit cards, which both have low limits. “My parents bought appliances and computers with their credit cards, but that’s a memory for Venezuelans.”
As incomes have dropped and living costs have risen, credit cards have become essential for many people to make everyday purchases in supermarkets and pharmacies, even as credit limits fall and some banks abolish the cards altogether.
“The banks don’t have a way to lend and we need these credits,” 36-year-old Pereira said, adding the total limit on her cards is now $2 every month, so low she can no longer use them to make food purchases as she did a year earlier.
Cards made up just 2% – equivalent to some $16 million – of the credit portfolio of Venezuelan banks at the end of December last year, according to the country’s banking superintendency.
In 2012, that figure was 12% in Venezuela, while in countries like the Bolivia and Dominican Republic credit cards currently make up 5% of banks’ credit portfolios, according to those countries’ regulators.
“Hyperinflation and the regulations have ended consumer credit,” said one Venezuelan banking executive, who requested to remain unnamed for security reasons. “This kind of financing has stopped being a business for banks. The bolivars that they can put toward credit are going to other sectors” like businesses.
Although some local credit cards have higher limits of between $30 and $100 they are still inadequate – the average monthly cost of feeding a family was some $370 in December, according to the independent Venezuelan Finance Observatory.
“Consumer credit is what gets punished. It’s the least likely to be given out,” said economist Luis Arturo Barcenas, of analyst firm Ecoanalitica. “Often these credits weren’t just for buying appliances, but also for day-to-day expenses.”
Maduro’s government has taken multiple measures to ease inflation by increasing the supply of foreign cash, raising taxes, limiting credit, and reducing public spending. As part of those attempts, the central bank instructed financial institutions to freeze 73% of deposits at the bank.
“If there aren’t sufficient resources you can’t give that much credit,” said another bank executive.
Despite the steps, prices soared at the end of last year, taking annual inflation to 234%.
Buy Crypto NowLast month Maduro encouraged banks to give businesses loans indexed to the exchange rate so they can “produce goods, riches” but he did not hint at other loans or consumer credit.
Neither the central bank nor the banking regulator replied to requests for comment.
“With the limit on cards you can’t even pay for lunch,” said Gregorio Afonso, a 53-year-old university professor who has two local credit cards and an income of $20 monthly. “We’ve been in free fall since 2013 without credit, without social protection, and working multiple jobs.”
