Borrowing alternatives for households in Lithuania: Current situation, trends and challenges

Abstract

Purpose – to analyse the main borrowing alternatives available to Lithuanian households and the credit market as a whole, focusing on its peer-to-peer (P2P) segment, the forecast of its growth, and possible challenges. Research methodology – the research methods applied were scientific literature analysis, statistical data analysis, comparative analysis, correlation-regression analysis, linear trend forecasting method. Findings – the prevailing borrowing alternative for Lithuanian households still remain bank credits. Besides, borrowing from P2P market is becoming more and more popular. Although the macroeconomic environment for all the credit market segments is the same, the P2P segment is developing significantly faster. If this trend remains unchanged, the whole credit market is likely to face challenges, such as the growth of overdue loans, insolvent customers, the rising share of non-perform-ing-loans (NPL), etc., that may affect its overall stability. Research limitations – the empirical study relies on the country’s macroeconomic indicators that influence household borrowing. Such factors as borrower’s age, income level, marital status and others were not taken into account in this study. The forecast of the P2P segment growth of the consumer credit market and comparison with its banking segment is based on the analysis of 4 years of real monthly statistics for both segments. Practical implications – the performed analysis and its results can be useful for the future research within the household borrowing trends, especially in Peer-to-Peer platforms, and specifically for the Central Bank, the Ministry of Finance and other institutions that regulate the credit market, as it provides information on modern borrowing trends and the challenges it might bring. Also, for P2P platforms themselves, planning and further developing their activities and adjusting lending conditions with the aim to attract higher-quality customers. Originality/Value – household borrowing, the credit market and the P2P platforms are widely analysed by both academics and financial institutions, such as central banks. However, it is mainly limited to the analysis of statistical data and does not pay attention to possible market development issues. This study focuses on the analysis of the growth trends of the P2P market and the potential challenges that may arise thereafter.