Czechs embrace credit culture

Twelve years after the return of democracy to the Czech Republic, Czechs are learning to enjoy the benefits of living on credit. "Do you need new household appliances? Buy them on lease!""Do you need money? We won't ask you what it's for!" Such lucrative offers appear on billboards, newspapers and in TV ads - not to mention shopping malls and supermarkets. They are simply everywhere and Czechs find them increasingly tempting. Daniela Lazarova has the story:

Gone are the days when getting a bank loan was a major challenge that involved finding three guarantors or offering your house as collateral. Today banks and salespeople are falling over each other with credit and leasing offers. And Czechs are gradually accepting the fact that living on credit is a perfectly normal thing to do. In the past two years the credit business has risen by over 200 percent. Impatient to realize their dreams right away, Czechs have signed over two and a half million contracts for the payment of approximately 140 billion crowns.

Economic analyst Evzen Kocenda explains what is behind this sudden boom in the credit-business:

"It shows increased confidence in the Czech economy and the fact that people are susceptible to the massive advertisement campaigns. But most of all -people are starting to play with a new toy and they are learning to use that toy. The situation in the Czech Republic is slightly different from that in Western Europe and the United States where credit is more easily available through credit cards . In the Czech Republic most of the plastic forms of payment are merely bank cards not the classic credit cards that enable the customer to shop on credit so people have to rely more on credit loans offered by banks . There's nothing wrong with this because in that way money circulates more rapidly boosting investment and economic growth."

A lot of people are buying goods on leasing - and there are so many offers available ...are customers getting ripped off by high interest rates?

"Obviously some of them are, but as I said earlier people are only beginning to get used to this kind of financing and they sometimes don't think things through properly."

What about the impact on the economy, do you see it as entirely positive?

"No, I don't see it in an entirely positive light, largely because the financial situation of a certain percentage of Czech households is not such as to enable them to buy goods on leasing at high interest rates. So this kind of financing has its drawbacks. When people get used to this way of financing the situation will improve but temporarily the trend may have some short-term negative consequences as well."