Financial Struggles and Credit Usage
According to recent data, approximately 30% of Mexicans find that their income does not cover their expenses by the end of each month. As a result, many households resort to borrowing, cutting back on spending, or tapping into their savings to make ends meet. This issue is particularly pronounced during challenging financial periods, such as the “cuesta de enero” (January crunch).
The Role of Credit in Mexican Households
Luis Rangel, Vice President of Credit at Kueski, highlights that relying on credit to cover daily expenses is a common practice in Mexican households, especially during three specific times of the year: January crunch, summer season, and back-to-school period along with high consumption periods like the Buen Fin and December expenses.
Rangel explains, “In my experience in the credit sector, this practice of financing current expenses is quite common during these seasonal periods.”
Data on Credit Usage During January Crunch
According to Kueski’s data, 56% of the loans requested during the January crunch are used to organize expenses and ensure immediate liquidity.
Several factors contribute to this situation at the beginning of the year, including excessive December spending on holiday celebrations, gifts, and various festivities that typically exceed the household’s regular income. Additionally, mandatory payments such as vehicle taxes, insurance renewals, school tuition fees, and clothing purchases for the upcoming school year add to the financial strain during a period of rising prices.
“These factors, combined with the fact that the Mexican market does not necessarily have robust financial planning, often leads more users to seek credit,” Rangel adds. “At Kueski, 91% of our clients request financing to help them better manage their finances.”
Increasing Demand for Higher Credit Amounts
A survey conducted by the microcredit platform Credmex reveals that Mexicans not only seek credit to cover their daily expenses but are also increasingly requesting higher loan amounts.
Only 25% of respondents expressed satisfaction with their current credit line, while 75% desire larger loans to cover their daily expenses due to the constant rise in prices across the country.
Among those surveyed, 25% cited emergencies as the primary reason for seeking credit, 15% mentioned family-related expenses (especially basic daily needs), 6% for medical expenses, and 4% for entrepreneurial funds.
Credmex points out that emergencies and covering household expenses are the primary reasons for seeking credit. This aligns with the Banco de México’s report, “Indicators of Personal Loans and Microcredits,” which states that 44.5% of individuals’ expenses equal their monthly income, while 20% spend more than they earn, and only 19% of Mexicans spend slightly less than their monthly salary.
Struggling to Make Ends Meet
According to the National Commission for the Protection and Defense of Financial Services Users (Condusef), only 8% of Mexicans consistently have money left over at the end of each month. Meanwhile, 30% struggle to make their income last throughout the month.
Consequences of Not Making Ends Meet
- Borrowing: Four out of ten people rely on informal loans from friends or family to cover their expenses.
- Reducing Spending: 68% of respondents reported cutting back on monthly consumption to make their income stretch further.
- Using Savings: 32% of respondents utilized their personal savings, often referred to as “cochinito,” to manage their expenses.
Key Questions and Answers
- Q: Why do Mexican households rely on credit during the January crunch?
A: Households face various financial pressures at the beginning of the year, including excessive holiday spending, mandatory payments, and rising prices. This leads many to seek credit to cover their daily expenses. - Q: What are the primary reasons for seeking credit in Mexico?
A: Emergencies and covering household expenses are the most common reasons for seeking credit, according to Credmex’s survey. - Q: How many Mexicans struggle to make ends meet by the end of each month?
A: Approximately 30% of Mexicans find that their income does not cover their expenses by the end of each month, according to Condusef.
