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Credit restrictions and high inflation push Venezuelans to buy in installments

Credit restrictions and high inflation push Venezuelans to buy in installments

Some businesses in Venezuela are turning to traditional layaway systems to allow customers to purchase products ranging from shoes, appliances and even motorcycles, amid high inflation and restrictions on bank credit, which impact consumption.

Although the Government of President Nicolás Maduro relaxed controls in 2019 to allow de facto dollarization that slightly recovered the economy, this year high prices, wage lags have persisted, and commercial and industrial activity has slowed down.

The installment payment scheme, in which customers pay an initial deposit to reserve the product, and pay the rest in weekly or monthly installments, has become a strategy for businesses seeking to increase sales, a dozen said. of merchants, presidents of business associations and analysts.

The Government, at a time when the economy was collapsing, accentuated regulations on local banks with the setting of maximum interest rates and the imposition of lending only up to 27% of the total money flow. The measure made credit cards useless for Venezuelans.

The situation is difficult and before it was impossible to pay for a motorcycle like this (in installments)“said Ernesto Urdaneta, a delivery driver for a medical equipment company in Maracaibo, in the west of the country, who purchased a motorcycle four months ago in installments.

Urdaneta, who also delivers at a pizzeria and with his two jobs earns the equivalent of about $200 a month, had an old car, which was expensive to repair, so he sold it. With this he gave the initial payment for the motorcycle, which cost about 900 dollars.

Customers usually pay between 40% and 50% down for the products, an amount that may vary depending on the business.

There is always a risk, but customers leave money, complete their payment and take the pieces“said Betsy Pérez, owner of a clothing store in Valencia, in the center of the country, who for two months has been offering merchandise in two or three installments to improve her sales.

In Venezuela, consumer loans are scarce. The participation of credit card financing in the total banking portfolio barely represented 2.2% (about US$ 13 million) at the end of March 2023, according to the latest data from the Superintendency of Banks.

If you have sales problems, you can manage to sell. Consumer credit in Venezuela died, credit card (limits) are ridiculous“said Luis Vicente León, director of local consulting firm Datanalisis.

The Superintendency of Banks and the Central Bank did not respond to requests for comment.

Pedro Vallenilla, founder of Cashea, one of the applications that businesses use in the “buy now and pay later“, he said that in that way some businesses “have been able to increase part of their sales”.

Stores in streets and shopping centers in the country’s main cities display advertisements offering installment sales. Some businesses make the offer on their own, others through applications, but that oxygen is still insufficient.

Selling by installments is a way of placing products and thus the inventory is rotated. The economy needs to boost consumption“said Gustavo Valecillos, president of Consecomercio, the union that brings together merchants.

Commercial sales, at least in Caracas, fell 4.8% between January and October of this year compared to the same period in 2022, according to calculations by the local firm Ecoanalítico.

After a year I was able to buy shoes. I paid half and I will pay the rest in two parts.”said Juan Vegas, a construction worker, as he left a shoe store in Caracas. “Before we did this with cards”.

Source: Gestion

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