Low credit penetration within the EU

Measuring credit penetration in a market allows financial institutions to evaluate the amount of revenue they can generate. As a result, most financial establishments try their hardest to increase a knowledgeable penetration in their target credit markets by introducing more inclusive plans and credit facility options. There should be steps aimed mainly at targeting that particular section of a market that in not included into the credit system. Non-inclusion could occur for a variety of reasons including the economic state of the country/market, financial habits and culture of the target market, as well as other human factors such as education, lack of awareness or other culturally subjective factors. In the case of the EU, most countries share a diverse yet commonly accepted set of principles and cultural values, thus the reported low credit penetration in certain parts of the EU must be understood and analyzed from a different perspective as to why this particular fertile market, where incubation of new businesses and ventures is particularly fast-tracked, seems to only have a small share in the credit system of the European Union.

Why is there a Gap in Credit Penetration Across the EU?

The figures come down to the individual economy of the countries having low credit penetration levels. Specifically, according to Statista, countries having slow GDP growth and a high percentage of the population below the poverty line are seen to lag behind. Countries such as Bulgaria, Romania, Hungary, Ukraine, Serbia, Belarus and Slovakia, to quote a few examples, generally have a decreased trend towards acceptance of credit systems and thus have a credit penetration, on average, below 30% of the total population. Weakened economies and deteriorating personal financial situation of citizens, leads to a particularly slow market in terms of industry, business growth and commerce, weakening the infrastructure required for the effective adoption of a credit based commercial system by businesses and capital ventures.

A Welcome Initiative by the EU

The recent issuance of the PSD2 Directive by the EU has led to a new era for credit and finance across the EU. The increased protection of consumer rights, more inclusive policies and the ability of non-bank entities to participate in the loaning and credit system has increased the possibilities for the creation of a highly integrated, more fruitful and secure financial system in the European Union. The new directive has not only increased the level of confidence among consumers on the credit system, it has also created opportunities for new and more refined financial practices focused towards the consumers’ needs and requirements. The adoption of a broad range of fintech solutions allows to cover for various types of customers’ needs, which in turn allows for greater customer engagement and inclusion, by the creation of more flexible lending and loaning packages across the European Union. In the long-term, this will lead to increased financial inclusion and more fair access to credit for larger parts of the EU community and countries requiring more tailored approaches can be dealt with according to their own financial and cultural ecosystem.

Slow and Steady Markets

A further increase in the penetration of slow markets can be brought about through the creation of informational channels accessing even remote portions of the countries. Paired with increased promotion and awareness programs, financial inclusion and fair access to credit is achievable. Diversification of services to suit particular specific needs of the market, paired with strategic alliances with local vendors and financial institutions can also lead to an increase in the acceptance and adoption of a continued system of financial inclusion by markets that are hard to manage.

Result of Diversification in Financial Ecosystem: Finclude

Finclude offers financial wellbeing services that empower EU citizens fair access to credit and expand the consumer credit markets for financial institutions. Traditional credit scoring can lead to rejection, frustration and confusion for many European citizens. Join the revolution! Add your details to our waiting list and be one of the first to enjoy the merits of financial wellbeing!
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