The Czech Republic has witnessed a slight uptick in the proportion of people classified as riskily indebted, rising from ten percent last year to eleven percent this year, according to a survey conducted by the Ipsos agency for the Czech Banking Association. The increase is most notable in the age group of 36 to 44 years, highlighting a potential vulnerability in this demographic. Individuals with vocational training emerge as the most adversely affected from an educational perspective.

The concept of risk indebtedness is characterized by individuals borrowing for purchases without the financial capacity to save, holding three or more loans, and resorting to taking additional loans to meet existing installment payments. Notably, the survey reveals a responsible trend among younger individuals and seniors, with Prague residents displaying the lowest risk indebtedness at seven percent, attributed to higher incomes in the capital.

In terms of regional disparities, the risk of indebtedness is most prevalent in Moravia, standing at twelve percent, followed by Bohemia with ten percent. Filip Hanzlík from the Czech Banking Association notes that despite the worsened situation, there is a positive aspect—there is an increase in the number of individuals demonstrating minimal risky behavior, rising from 33 percent last year to 42 percent this year.

A noteworthy finding is that in the case of financial inability to repay, the percentage of the population resorting to risky solutions has decreased from eleven percent last year to seven percent this year. Hanzlík emphasizes the importance of vigilance, pointing out that a significant portion of individuals fails to verify whether non-banking companies arranging loans possess licenses from the Czech National Bank. Such oversights can substantially increase the risk for debtors, potentially leading to challenging and unpleasant financial situations. This underscores the need for financial literacy and awareness among the population to navigate the lending landscape responsibly.

Article by Prague Forum