Cayman’s $2.5 billion credit bill

$70 million in car loans, $5 million in student loans

There is just under $70 million in car loan debt on the books of Cayman's Class A retail banks.

Cayman Islands residents have collectively amassed more than US $2.5 billion dollars in household debt, according to figures from the Cayman Islands Monetary Authority.

That’s just less than $40,000 for every person on island.

The largest chunk of that figure – nearly $2.2 billion – is invested in property.

The numbers, last updated in September 2020, also show around $70 million in car loans, more than $5 million in education loans and around $244 million in miscellaneous borrowing, including credit cards and other personal loans.

To the untrained eye those numbers might seem staggering. But Simon Cawdery, an economist and host of the Money Sense radio show, says from a purely statistical perspective, the average Caymanian appears to be in less debt than the average Brit or American.

Our national household debt as a percentage of Cayman’s Gross Domestic Product is 41%, compared to more than 70% in the UK and the US.

However Cawdery, founder of Helix Advisory Services Ltd., cautions that Cayman has a proportionately higher number of people with zero debt, potentially skewing the statistics.

Simon Cawdery

“The numbers don’t necessarily reflect the reality. You have large income disparity in Cayman, so you will have many people who have no debt at all and then some people that will have a significant amount.”

Looking at car loans, for example, the $70 million in debt on the books of Cayman’s Class-A retail banks is enough for every car owner in Cayman to be carrying a $2,000 debt.   The reality, says Cawdery, is that a large number of people own their cars outright, while a smaller portion have taken significantly larger loans to fund their vehicles.

He said investing in property has traditionally been a good bet in Cayman Islands, while using credit to fund a ‘depreciating asset’ like a vehicle or to fund monthly expenses rarely makes sense and can be dangerous at the extreme.

“The thing to consider when taking on debt is the value of the asset – as well as what will happen to its value over time – compared to the level of the debt,” he added.

Issues: Cost of Living

 

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