Philippines Unsecured Lending Market

Philippines unsecured lending market valued at PHP 70 Million, driven by digital platforms and BNPL schemes, with potential to exceed US$1B by 2025 in digital lending.

The Philippines Unsecured Lending Market is valued at PHP 70 million, based on a five-year historical analysis. This growth is primarily driven by rising consumer demand for quick and accessible credit, the proliferation of digital lending platforms, and the increasing adoption of innovative solutions such as Buy Now, Pay Later (BNPL) schemes. The surge in digital lending, which now comprises a significant portion of the market, reflects the shift towards online and app-based borrowing, particularly among younger and tech-savvy consumers.

Metro Manila, Cebu, and Davao remain the dominant cities in the Philippines Unsecured Lending Market. Metro Manila leads due to its status as the capital and largest urban center, hosting the majority of financial institutions and a diverse consumer base. Cebu and Davao continue to gain prominence, supported by robust economic growth, increased urbanization, and expanding access to digital financial services.

In 2023, the Bangko Sentral ng Pilipinas (BSP) issued Circular No. 1165, Series of 2023, introducing enhanced consumer protection standards for unsecured lending. This regulation mandates clear disclosure of loan terms, caps on interest rates and fees, and stricter transparency requirements for all lenders, including digital and non-bank institutions. The regulation aims to ensure responsible lending, improve borrower outcomes, and reduce abusive practices in the unsecured lending sector.

Philippines Unsecured Lending Market Segmentation

By Product Type:

The Philippines' unsecured lending market is segmented into Credit Cards, Salary Loans, BNPL & Personal Loans, Microfinance, SME Loans, and OFW Loans. Credit Cards and Salary Loans dominate the landscape, driven by rising e-commerce adoption and growing employer-linked payroll financing. BNPL and Personal Loans are expanding swiftly due to greater merchant acceptance and app-based onboarding. Microfinance caters to low-income and unbanked populations, while SME Loans benefit from data-driven underwriting and top-up products. OFW Loans continue to grow on the back of remittance flows and dedicated banking partnerships.

By Provider Type:

The Philippines' unsecured lending market is segmented by provider type into Commercial Banks, Non-Banking Financial Institutions (NBFIs), Co-operative Banks, Microfinance Institutions (MFIs), and FinTechs. Commercial Banks continue to lead the market due to their established customer trust, regulatory support, and digital banking capabilities. NBFIs follow closely, leveraging their reach across underserved regions. FinTechs are emerging as the fastest-growing segment, driven by rapid digital adoption, BNPL expansion, and app-based credit offerings. MFIs and Co-operative Banks maintain a stable presence, catering to low-income and rural borrowers with localized credit solutions.

Philippines Unsecured Lending Market Competitive Landscape

The Philippines Unsecured Lending Market is characterized by a dynamic mix of regional and international players. Leading participants such as BPI Family Savings Bank, Rizal Commercial Banking Corporation (RCBC), UnionBank of the Philippines, EastWest Banking Corporation, Security Bank Corporation, Cebuana Lhuillier, Cashalo, Tala Philippines, Home Credit Philippines, Digido, Asia United Bank (AUB), Maya Bank, GCash (Mynt), LenddoEFL, Grab Financial Services Philippines contribute to innovation, geographic expansion, and service delivery in this space.

Philippines Unsecured Lending Market Industry Analysis

Growth Drivers

Employment Growth and Digital Wage Access:

The Philippines’ employment rate is projected to rise from 59.0% in 2024 to 83.0% by 2030, driven by growth in BPOs, digital services, and formal wage sectors. This expansion is widening access to salary-based credit products like payroll loans, credit cards, and BNPL. As digital wage payments become more mainstream, particularly through QR-enabled payment systems, more salaried workers are entering the pool of credit-eligible borrowers, fueling unsecured lending demand.

Household Credit Expansion and Consumption Needs:

Household loans grew by 23.4% YoY as of June 2024, with the fastest acceleration seen in unsecured lending. This surge reflects rising reliance on credit to cover essential expenses such as education, rent, health, and emergencies. Household final consumption expenditure also saw a positive uptick from 5.2% in 2023 to 5.5% in 2024, signaling strong consumption behavior and sustained demand for flexible, short-term credit options.

Policy Support and Digital Financial Ecosystem Growth:

With over 94 million users adopting QR-enabled digital payments by 2025, the Philippines is witnessing increased digitization of financial services. Regulatory reforms around data privacy, interest rates, and anti-money laundering (AML) are improving borrower trust in digital-first lending platforms. These fintech regulations are fostering responsible lending practices while enabling faster onboarding and product scaling across app-based unsecured loan providers.

Market Challenges

Elevated NPL Ratios Impacting Credit Risk:

The average Non-Performing Loan (NPL) ratio in the Philippines rose sharply from 2.0% in 2018 to a peak of 4.0% in 2021, before easing to 3.2% by end-2022 and 2023. Despite this decline, elevated NPL levels continue to signal stress in asset quality. This has prompted lenders to adopt a more cautious stance toward new unsecured lending, especially for riskier borrower segments such as MSMEs and first-time credit users.

Interest Rate Caps Restricting Lending Flexibility:

The BSP’s ceiling on credit card interest rates - capped at 3% per month (36% annually) - limits the ability of lenders to reprice loans for higher-risk profiles. This regulatory cap, while protective for consumers, reduces lender margins and discourages credit expansion to underserved or high-risk groups. As a result, financial institutions are becoming more selective in their lending strategies, affecting credit penetration and inclusivity.

Philippines Unsecured Lending Market Future Outlook

The future of the Philippines unsecured lending market appears promising, driven by technological advancements and a growing consumer base. As digital platforms continue to evolve, lenders are expected to leverage artificial intelligence for better credit scoring and risk assessment. Additionally, the increasing integration of financial services with e-commerce will likely enhance loan accessibility, particularly in underserved regions, fostering a more inclusive financial ecosystem that caters to diverse consumer needs.

Market Opportunities

Collaborations with Digital-First Fintechs to Scale Lending Access:

Partnerships with fintechs like Tonik Bank present traditional lenders with a fast-track to digitization through advanced APIs, AI-based underwriting, and automated KYC/AML. These collaborations reduce onboarding time by up to 70%, enable credit access for over 60% of new-to-credit users, and expand loan distribution through 1,000+ digital touchpoints - making them a key strategy for unlocking underserved borrower segments.

Personalized Credit Solutions Backed by AI and Behavioral Data:

The shift toward customized lending is gaining momentum with platforms leveraging employer APIs, telecom usage, and retail data for dynamic credit scoring. Lenders can design need-specific products - like medical or education loans - using AI/ML risk models and gamified repayment tools. This not only improves loan stickiness but also drives higher RoC and double-digit loan book growth in underserved markets.