Profiting from payroll lending

Overview

Since 2004 payroll lending in Brazil has grown twice as fast as other types of consumer credit. Payroll loans offer borrowers substantially lower annual interest rates than other types of personal loans. Payroll loans expose banks to very limited risk, with default rates of only around 1 per cent, largely because lending has thus far focused primarily on government employees and government pensioners.

Although payroll lending growth will likely remain strong, banks will ultimately...

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