Payday loans growth has been a hot topic in the news over the past year or so. With various changes taking place,the regulation of all businesses make up the sector. Yet, while this type of loan has been a concern for the media in many countries. Unlike the US and the UK, it’s not something that you’re likely to find in the news across the world.
Economies such as China and Brazil, along with nations like Poland fall in to this category. This is because they don’t have the same structures for personal finance in place. Yet why are these the locations that loan companies will move to, to ease the payday loans growth?
Some speculate that this is a cultural phenomenon. They believe it’s the result of societies emerging where living beyond your means is now the norm. Others have drawn parallels between the pace of development and the availability of credit. The more advanced the economy of a country the more likely further financing will be available. This includes a more developed loan market.
Payday loans growth in the UK?
It’s acknowledged that payday loans were initially in the American market. They then made their way across the Atlantic to the UK around 5-7 years ago. Before that, quick cash borrowing options were personal loans, credit cards or something like a pawn broker. Yet, the UK is not the only country to have followed the US into the payday market.
It’s true that less developed economies haven’t yet embraced this type of personal finance. Yet some of the world’s most advanced economies have. For example, Japan and Australia have well developed loan offerings.
There’s a big difference between these types of payday loans and those provided in the UK. There have been caps on short term loans and tighter controls since the launch of this type of finance in Australia and Japan. The UK has been slow to catch up on capping interest rates. This includes charges and preventing unlimited rollovers of repayments. But Japan, for example, has had this in place since the start of the 21st century.
It’s true online payday loans are not that prominent in some of the more emerging economies. Yet the market is present and payday loans growth is expanding. Particularly as the benefits of this type of finance for consumers and loan companies become more clear.
In some locations there are other barriers that new forms of finance have to contend with. For example, in China there is a large ‘black credit market’. Here finance for personal use is available on the black market rather than by reputable means.
Further credit checking systems are not as advanced as countries like the US and UK. This includes gathering reliable consumer data which helps make fast lending decisions. This could also have had an impact.
It may well be a culture of borrowing that has seen UK payday loans become more popular in the UK and US. it will be interesting to see how the sectors develop in countries such as China and Brazil. Could they succumb to the influence of global trends in consumer finance or go their own way?