by Geralyn Edward

BARBADIANS may be borrowing to maintain their standard of living without giving full consideration to their ability to repay their debts.

The caution has come from financial advisory firm PricewaterhouseCoopers as it revealed that about $4.6 billion was borrowed from the island's six commercial banks last year.

This was a 24 per cent jump over 2004 when Barbadians borrowed $3.7 billion and did not include credit unions, finance firms and other sources of loan financing.

The firm said easy access to loans could create a population that depended "heavily on borrowings to maintain living standards".

In its latest Barbados Banking Industry Performance Highlights, the firm said while the increase in loans might be a good thing for bankers because of the potential to boost profits, there were inherent dangers posed by this situation.

PricewaterhouseCoopers said there was a risk that banks could be lending to a larger group of people who might not be in a position to repay their debts.

"Fabulous growth of the loan-book can be a double-edged sword, as it can come at the expense of poorer credit quality and hence lead to potential loan losses.

"The availability of easy credit can result in a population that relies heavily on borrowings to maintain living standards, without adequately considering the ability to service this debt in the future," the firm stated.

According to PricewaterhouseCoopers, commercial banks placed emphasis in 2005 on mortgages and commercial loans given the construction boom. However, banks also pushed credit cards "given the potential profitability of this product".

Commenting on the fight for market share among the banks, PricewaterhouseCoopers said the level of competition in the Barbados market was "perhaps the highest that it has ever been and is arguably the highest of any other Caribbean market".

The firm added: "The impact of three new entrants in as many years has been felt with significant competition on price and risk as new banks seek to build market share and presence."