Jordanians’ debt-to-income ratio up significantly last year

AMMAN — Individuals' debt-to-income ratio (DIT) reached around 63 per cent by the end of 2014, according to the Central Bank of Jordan.

In its Financial Stability report (JFSR2014) released Wednesday, the CBJ said that the DIT has increased significantly since 2008 when it was 40 per cent, indicating that the rise demonstrates that individuals have too much debt for the amount of income they earn, the Jordan News Agency, Petra, reported.

The report said that the rise in the DIT signals high lending risks, requiring banks to be vigilant while lending to such a financially troubled sector, Petra said.

The report also said that the banks' exposure to the risks of Stock Market was "very limited" due to their modest investments in shares and the decrease in credit facilities granted to share buyers, according to Petra.

Banks' credit facilities to the real estate sector constituted 33.4 per cent of the total facilities they granted to individuals and other borrowers in 2014, JFSR2014 said.

The report also indicated an improvement of around 10 per cent in banks’ response to credit facility requests between 2013 and 2014 compared with the 2010-2012 period. Around 26.8 per cent of the total credit facility requests submitted during 2012 were turned down while only 17.6 per cent and 15.8 per cent were refused in 2013 and 2014 respectively, the report said. 

The findings showed that the operational efficiency level of banks has improved considerably during 2014 as a result of the decrease in operational expenditures and allocations to their total income.

“In spite of such improvement, the interest rate margin in Jordan remains high compared with several other countries,” the report concluded.

According to the document, testing measures used to assess the ability of banks to withstand risks revealed that the banking system in Jordan is generally capable of withstanding shocks and high risks. 

There was an improvement in banks’ capacity to confront these risks in 2014 compared to 2013, the report said, adding: “These improvements are due to the substantial increase in banks’ profitability in 2013 and the possession of high levels of capital that are considered among the highest in the MENA region.”