© Reuters. FILE PHOTO: A pair who purchased a tv on sale had their bike towed whereas buying in a retailer throughout Black Friday gross sales, in Caracas, Venezuela November 25, 2022. REUTERS/Leonardo Fernandez Viloria/File Photo
By Mayela Armas
CARACAS (Reuters) – Some retailers in Venezuela are turning to old school layaway buy presents to assist prospects purchase every thing from residence home equipment to footwear and bikes, as sky-high inflation and tight credit score restrictions reduce off different avenues for buying.
Though the federal government of President Nicolas Maduro relaxed forex controls in 2019, resulting in a slight restoration for the crisis-hit nation, this 12 months the best worth development in Latin America, shrinking wages and falling consumption have once more battered the financial system.
Layaway, the place prospects pay an preliminary deposit to order a product after which pay the steadiness in installments, has turn out to be a method for companies trying to enhance gross sales, a dozen retailers, enterprise guild presidents and analysts mentioned.
Buy now, pay later (BNPL) providers – a brand new twist on layaway – have turn out to be extra frequent world wide for hard-pressed customers, however in Venezuela extreme credit score restrictions and low wages have made them nearly a necessity.
The authorities permits banks to lend solely 27% of their complete cashflow, rendering bank cards largely ineffective as costs balloon on annual inflation of greater than 300%.
“The situation is difficult and before it was impossible to buy a motorcycle,” mentioned Ernesto Urdaneta, 39, who delivers medical provides in western Maracaibo and 4 months in the past purchased a bike on layaway.
Urdaneta, who additionally works in a pizzeria and earns $200 a month in complete, bought his outdated automobile to get preliminary funds for the bike, which price about $900.
“With the bike I can make more deliveries to earn more and support my family,” he mentioned.
Customers normally pay an preliminary 40% to 50% of the value, although it will probably fluctuate by retailer.
“There’s always a risk, but clients leave some money, complete the payment and take their clothes,” mentioned Betsy Perez, who has been providing layaway for 2 months at her retailer in central Valencia to attempt to enhance gross sales.
SHRINKING CONSUMER CREDIT
Credit playing cards have been simply 2.2%, about $13 million, of financial institution’s complete portfolios in Venezuela in March, the newest month of knowledge out there from the Superintendency of Banks.
“Consumer credit has died in Venezuela,” mentioned Luis Vicente Leon, director of consulting agency Datanalisis, calling credit score limits “ridiculous.”
The Superintendency and the central financial institution didn’t reply to requests for remark.
BNPL schemes have allowed retailers to extend some gross sales, mentioned Pedro Vallenilla, founding father of Cashea, an app offering the service.
But regardless of indicators providing layaway at shops throughout Venezuela and quite a lot of BNPL apps, business gross sales within the capital Caracas fell 4.8% between January and October, in response to advisor Ecoanalitica.
“The economy needs consumption to be more dynamic,” mentioned Gustavo Valecillos, president of the Consecomercio retailers guild, including layaway helps transfer stock.
“A year later I could buy shoes. I paid half and the rest in two installments,” mentioned building employee Juan Vegas as he left a shoe retailer in Caracas. “Before you could use a card.”